Low Ship Sales, Trigger Demolition Market Firming

Prices in the ship recycling market have held firm over the past week, as supply has been slow. In its latest weekly report, shipbroker Allied said that “after recent declines, ship recycling prices have held firm and even increased slightly, perhaps as a result of the relatively low number of demolition candidates. Bangladesh continues to receive the majority of vessels for recycling and the number of sales/arrivals is painting a much rosier picture of the situation there than was the case a month ago. Further positive news for breakers came as the government altered the environmental clearance required for cutting work to start on vessels. The Business Standard reports that 42 ships have been awaiting clearance following the initial change in classification back in March. With the roll-back of this, an expected 500,000 tonnes of scrap will be available for processing. The main deal this month, in a boon for the recently maligned Aliaga, is the en-bloc sale of three Hapag Lloyd container vessels. Scrapped in accordance with the EU Ship Recycling Regulation, the vessels achieved a firm US$ 380/ldt due to the inclusion of lots of spares. As Bangladesh bring HKC ratification ever closer, there are increasing calls for the EU to include its yards under their SRR scheme. If this comes to fruition, sales to Turkey such as this one could become a thing of the past”, the shipbroker concluded.

In a separate note, shipbroker Clarkson Platou Hellas added that “the market this week continued to have the feel of a strained position, not really knowing which direction the sentiment is set to take. Whilst Bangladesh remains the most competitive, there are still ongoing issues and delays for the issuance of Letters of Credit (L/C) due to the shortage of the currency reserves in the country. It does appear to be on a case-by-case scenario as reports suggest some of the tonnage that have arrived over recent weeks are facing delays due to the persisting L/C difficulties, whereas some are unaffected.

Moving West, Pakistan remains dormant with no offers achievable for any available tonnage, and in India, the domestic steel markets had gained some momentum earlier in the week, although stabilised in the last couple of days. The problem the recyclers face is that the steel mills and other production units are not purchasing too much steel from the waterfront at the moment which is of a concern for those yard owners with inventory in hand. The Turkish market softened slightly this week on the back of the news that the Erdogan regime is projected to win the second elections resulting in a bad reaction in the local markets”, the shipbroker said.

Meanwhile, GMS (www.gmsinc.net), the world’s leading cash buyer of ships said in its latest weekly report that “amidst the ongoing slowdown in the supply of tonnage and the onset of the traditionally quieter summer / monsoon months that would certainly help ease off the demand, prices across the sub-continent markets remained steady for another week. There is also the impending budget on June 1st in Bangladesh and many End Buyers are waiting to see if any new changes / taxes are imposed on the domestic ship recycling sector before offering afresh on tonnage. However, the general consensus on the upcoming budget is that no changes are expected and that it may actually be positive on the overall business outlook in Bangladesh, amidst a growing demand for steel and raw materials due to various upcoming construction and infrastructure projects that are due in the summer months.

Additionally, the recent meeting in Bangladesh on whether to ratify the Hong Kong convention produced some interesting discussions and outcomes, with the country amending its ship recycling standard from ‘Red’ to ‘Orange’, on the environmental outlook for the country. The next step is for flags to ratify the convention before it can be entered into force, in what could be a landmark ruling in Bangladesh – the first sub-continent country to be actively doing so. Meanwhile, after a recent wobble in prices, India too has steadied and there is now an emerging demand as Buyers in Alang have missed out on a majority of the non-HKC (and reportedly, even some HKC) tonnage to the firmer Chattogram market. Pakistan remains on the sidelines, with political and economic chaos rendering this market virtually redundant and there is no realistic hope of the situation stabilizing any time soon. Finally, Turkey remains suspended in no-man’s land, as the situation remains unchanged from last week and the election results awaiting to be announced”, GMS concluded.

Nikos Roussanoglou, Hellenic Shipping News Worldwide