Lack of Tonnage Keeps Hampering the Ship Recycling Market

The ship recycling market is “hungry” for more vintage tonnage, which is rather scarce at present, while the industry’s focus is now shifting towards decarbonization. In its latest weekly report, shipbroker Clarkson Platou Hellas noted that “the main topics of debate and discussions this week were surprisingly not centred around aggressive pressure from the NGO’s and other environmental groups but more aligned to green steel and sustainability in ship operations and ship materials. The current focus was on decarbonisation and the downstream scenario from the steel that is recycled from vessels and how this could impact the further environment”.

According to the shipbroker, in the latest Ship Recycling Forum in Dubai, “several presentations were provided to the audience by the ship recyclers and organisations from all three destinations in the Indian sub. Continent and Turkey which continued to show positive signs of improvement. One encouraging announcement was from the representative of Pakistan who informed the conference attendees that the Federal Government of Pakistan through various local associations has in principle recently confirmed their approval to proceed with the signing and ratification of the Hong Kong Convention for the safe and environmentally sound ship recycling. This is one big step but we hasten to add, their domestic yards in Gadani will take several years to implement the change in their yards with the impermeable flooring etc. But much credit must be given to the local authorities for their commitment to work towards a much better and safer recycling business in Pakistan. Change has to begin somewhere! In addition, it was announced that the Government of Pakistan, through the local Ministry of Climate change, has also recently issued a National Hazardous Waste Management Policy of Pakistan 2022, again showing their commitment for a greener climate. Some ship recyclers in Pakistan are already preparing their yards for HKC compliancy. There was even talk of another 100 yards being developed to cater for further expansion, but this again will be several years down the line”, Clarkson Platou Hellas said.

“Elsewhere the representatives from India and Bangladesh also showed their improved facilities and gave an insight into how they are looking to improve the recycling procedures downstream from the yards to the steel mills. As for the current market conditions, everyone stressed how quiet the market has been and the scarcity of tonnage in the recycling yards. The general views were that this scenario will continue into the new year and beyond and whilst market prices currently remain stable, many predict a return towards the USD 500/ldt at some stage during next year due to the continuing financial implications caused by the uncertainty globally which will affect commodities and currencies. Next week will see the Diwali festivities arrive, therefore little activity is expected, and we take this opportunity to wish all those celebrating, a Happy Diwali and all the best for much success and good health for the coming year”, the shipbroker concluded.

In a separate note, GMS (www.gmsinc.net), said that “Sub-continent markets remain subdued and deprived of tonnage as freight markets continue to fly. Depreciating currencies remain the chief concern (as do fragile steel plate prices), with rates well below USD 600/LDT and likely to move further down. Turkey too, remains in a depressed state with levels that remain suspended USD 250/MT below its recent spring peak, as its own currency and steel plate prices remain buried, along with the sentiments that too remain diminished. While the recent buildup seemed to suggest a greater level of activity come Q4 2022, this remains far from reality at this time as there is surprisingly little demand, due to strained banking / L/C limits and disconnected / high asking prices from Owners, leaving most plots in the sub-continent stranded in idle. The prognosis is therefore not good heading into the final months of the year, and all will be hoping for some increased positivity and ability to buy once the expected increase of tonnage starts to come in from next year. Things in the ship recycling market remained stable during the past week, with a positive glimpse in terms of the volume of transactions that came to light. What we see is that Bangladeshi breakers managed to secure a fair number of tonnage compared when compared to the rest of the ship recycling destinations. Pakistan and India remained quiet this week, with the domestic steel market crisis and the low local currencies seemingly still acting as major determinant obstacles in pushing for more appetite and more competitive offers from both these two markets. In Turkey, the market remained idle with the domestic currency meeting new lows during the past week. As a result of the above, offered scrap price levels seem to still be holding stable for the time being, though we may well be slowly traversing over to a different and possibly more active market state”, GMS concluded.

Nikos Roussanoglou, Hellenic Shipping News Worldwide