Ship Recycling: Lack of Available Tonnage the Norm

Alack of large vessels, available for demolition, has remained the norm over the past week. In its latest weekly report, shipbroker Best Oasis (www.best-oasis.com), said that “the ship recycling markets across India, Bangladesh, Pakistan, and Turkey showcased varied dynamics. India’s market initially displayed stability but soon faced a downturn, indicating a decreasing trend in performance. Bangladesh’s market continued its phase of cautious buying, with buyers preferring to negotiate for vessels at lower prices, leading to a lull in aggressive buying activities. Pakistan observed a period of calm, marked by a stagnant market with no significant shifts or events. Conversely, Turkey experienced a notable downturn, with vessel prices significantly falling by $10 to $15, exacerbated by a supply shortage due to optimistic freight market prospects driving up demand and limiting vessel availability. In light of recent forecasts by Fitch Ratings, the availability of ships for recycling could see varying levels, influenced by forecasted short-term profit gains for international shipping firms.

Source: Best Oasis

These gains are primarily driven by freight rates that remain high enough to counterbalance the expenses associated with diverting ships away from the troubled Red Sea, where attacks on commercial vessels persist. Despite these challenges, the shipping industry is not anticipated to undergo significant structural transformations. Nevertheless, the upward pressure on freight rates is expected to continue into the medium to long term, fueled by rising operational costs, increased charges at ports, and the economic demands of complying with more stringent environmental regulations. Therefore, although we might not witness an immediate increase in the number of vessels heading for recycling, the shifting economic conditions are poised to shape the trajectory of ship recycling activities in the foreseeable future”, Best Oasis noted.

In a separate report, shipbroker Intermodal said that “the demolition industry is facing a severe shortage of vessels suitable for recycling, especially larger tonnage. This shortage is the result of a confluence of geopolitical tensions, robust freight rates and strong chartering activity across various segments, which has prompted ship owners to keep their vessels in the water. India’s recycling hub, Alang, lacked tonnage as local buyers were reluctant to offer competitive prices.

This reluctance can be attributed to the uncertainty surrounding the upcoming elections and the influx of cheaper steel imports from China, despite strict anti-dumping measures in place. As a result, India has lost potential tonnage to rival destinations unless the ships require HKC-compliant recycling”, the shipbroker said.

“Pakistan, on the other hand, has remained relatively stable. Although the supply of new tonnage remains constrained, the easing of restrictions on the opening of Letters of Credit has provided some relief. Domestic factors, including a firm Pakistani Rupee and stable steel plate prices, have enabled Gadani recyclers to maintain competitive pricing. However, the market faces the immediate challenge of upgrading facilities to meet Hong Kong Convention (HKC) requirements within the next 16 months. Bangladesh has emerged as the frontrunner, leading on pricing and aggressively acquiring available tonnage.

Source: Intermodal

The resilience of the market is underpinned by a stable Bangladeshi Taka, stable steel plate prices and the recent easing of Letter of Credit restrictions. Despite the limited supply of larger vessels, Bangladeshi recyclers have been successful in securing smaller units, taking advantage of their geographical proximity to the Far East recycling routes. The Turkish market, however, has been in a downward spiral, plagued by soaring inflation and a weakening lira. Local steel plate prices have fallen, adding to the challenges faced by Aliaga’s recyclers. Uncertainty over shipowners’ willingness to enter into contracts at the expected lower price levels in Turkey has cast doubt over the market’s prospects”, Intermodal concluded.
source : hellenicshippingnews