Unlocking the Potential of Ship Recycling: Navigating Challenges and Opportunities
The overlooked sector of ship recycling holds the potential to play a pivotal role in the shipping industry’s journey towards decarbonization. However, despite this potential, the industry has faced challenges, particularly concerning the uncertainty surrounding the fuels needed to comply with new regulations. Older ships, instead of being retired for recycling, often linger in service.
In a recent report, shipbroker Clarkson Platou Hellas highlighted the gloomy state of ship recycling yards in the Indian subcontinent in 2023. The market faced volatility and uncertainty, driven by low demand for scrap steel domestically and financial restrictions in countries like Bangladesh and Pakistan. The second half of 2023 was particularly challenging, with the Houthi rebels’ situation in the Yemen/Red Sea area further discouraging owners from selling their aging container units for recycling.
The tanker sector’s strong rates led to a limited supply of units arriving at the waterfront, while owners of larger bulk carriers hesitated to sell amidst fluctuating rates, favoring them. This situation is expected to persist in the first half of 2024, mirroring the pattern of the last six months of 2023.
Turkey emerges as a noteworthy market, witnessing several vessels being sold or circulated for EU recycling. The current high demand for steel has driven prices into the high 300s, nearing the USD 400/ldt levels. Turkish recyclers are anticipated to experience a surge in activity.
Moving eastwards, there is a notable lack of demand for steel from domestic mills in India, creating a negative feedback loop for potential tonnage sales. Despite a strong price potential for suitable candidates, a recent container sale emphasizes the importance of including a large quantity of bunkers in the sale.
Bangladesh and Pakistan continue to grapple with financial restrictions, expected to persist. The upcoming elections in Bangladesh may offer some insight into potential assistance, although skepticism prevails within the industry regarding substantial change.
As the shipping industry grapples with the challenges of decarbonization, the overlooked domain of ship recycling holds promise, but it requires navigating uncertainties and seizing opportunities in evolving markets.
Challenges in 2023: In the past year, ship recycling yards in the Indian subcontinent faced a gloomy outlook. Low demand for scrap steel domestically, coupled with financial restrictions in Bangladesh and Pakistan, led to a volatile and uncertain market, particularly in the second half of 2023. The tanker sector’s robust rates resulted in a scarce supply of units arriving at the waterfront. Owners of larger bulk carriers hesitated to sell, given fluctuating rates, and the situation in the Yemen/Red Sea area caused further delays in recycling aging container units.
Prospects for 2024: The first half of 2024 is anticipated to continue the trend of limited activity, mirroring the challenges of the previous six months. The impact of the Houthi rebels in the Yemen/Red Sea region is expected to persist, delaying owners’ decisions to sell aging container units for recycling.
Turkey’s Emerging Role: Turkey emerges as a pivotal player in the ship recycling market, with several vessels being sold or circulated for EU recycling. Strong demand for steel has driven prices to the high 300s, nearing USD 400/ldt levels. Turkish recyclers are poised for busy times, capitalizing on this surge in demand.
Ship recycling stands at the crossroads of the shipping industry’s decarbonization journey. Despite the challenges faced in 2023, the evolving dynamics, especially in Turkey, highlight the potential for positive shifts in the coming years. Navigating uncertainties and addressing financial constraints will be pivotal in unlocking the full potential of ship recycling for a more sustainable shipping industry.
Indian Market Dynamics: Moving eastwards, the domestic mills in India are experiencing a notable lack of demand for steel, creating a negative feedback loop for potential tonnage for sale. While strong prices can be achieved for suitable candidates, it is crucial to note that certain sales include a significant quantity of bunkers.