Festivities Disrupt Demolition Market
As ship owners kept looking for signs of sustainable rebound in freight rates, good news were absent this week from the supply side, as demolition activity was lacklustre. In its latest weekly report, Clarkson Platou Hellas said that “it has been a fairly subdued week in the world of ship recycling as the Diwali celebrations caused the majority of buyers to lose their appetite and step away from any negotiations to spend time with their families. This has also resulted in any readily available unit for sale for recycling to be temporized and possibly restart next week once the festivities are finished. The problem we now have however, is it anyone’s guess as to where the market returns next week following the volatile period witnessed ‘pre-Diwali’. With several parties suggesting the previous sales were speculative to say the least, many units remain in the hands of the cash buyers unsold due to the lack of support from the actual recycling destinations. Furthermore, we expect a steady flow of tonnage to supply the market until the end of the year, with the freight rates in the Container sector containing to put these units under pressure which should present the market with many more candidates from this sector. The tidal wave of tanker tonnage that we experienced at the start of the year looks to be over as the traditional winter spike in rates has given Owners the opportunity to make some gains again chartering their ageing units”, the shipbroker said.
In a separate note, Allied Shipbroking said that “limited activity was seen in the demolition market during this past week. We are still witnessing a lack of activity on dry bulk tonnage, which is to little surprise even when taking into consideration the recent downward correction noted in the freight market. On the tanker side, still seems to be some interest noted amongst owners, yet activity remained in relative slumber. Two MR product tankers were reported as scrapped, while another 2 small tankers were sent to be beached as well. Sentiment here has played an important role, as improved market fundamentals have again affected ship-owners, who re-consider their plans. Bangladeshi breakers continue to be the first option for cash buyers, despite the softening direction seen in the domestic steel prices during the week. Meanwhile, the Indian market has showed a fair bit of volatility driven by sharp movements in the local FOREX, as well as local steel prices, making cash buyers hesitant to proceed with any over speculative deals. In Pakistan, market conditions have not yet improved significantly in order to attract more vessels for demolition, with the local currency remaining weak compared to US dollar”, the shipbroker concluded.
Meanwhile, GMS, the world’s leading cash buyer said that “this week saw some softening in the bullish Bangladeshi market, which finally succumbed to some inevitable weakness after a stellar showing at the start of the fourth quarter, mixed in with a declining local steel plate – last week’s bevy of local fixtures and this week’s beachings notwithstanding. Moreover, with India and Pakistan still in the doldrums, this meant that a lot of the overly bullish Cash Buyer purchases over the past month or so, are now starting to struggle to hit their required breakeven margins. Diwali holidays of course saw India away for much of the week, but the overall feeling there is of a market under pressure, due to a struggling currency and a volatile steel plate price that seems to decline for a majority of the week, only to make a recovery late in the week, subsequently leaving most local recyclers on edge as to whether the week’s negotiations / discussions will remain in the green.”
“Pakistan, like its subcontinent brethren, has local steel plate price concerns (where levels fell consistently through the week) and local sentiments are further marred by the ongoing investigation into another accident onboard a tanker there, following the issuance of cutting permissions on various wet units. Perhaps this is the long overdue wake up call the Gadani market needs in order to finally raise their standards after trailing many years behind their subcontinent competitors – in terms of infrastructure and complying to improving recycling standards in line with the Hong Kong Convention. With this in mind, GMS is pleased to announce (as per the press release from earlier in the week) that it has been awarded the prestigious Green Shipping Award at the recent 2018 Seatrade Maritime Awards, in recognition of the group’s tireless efforts to improve and promote green ship recycling standards across the industry”, GMS concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide