Red Sea Crisis Could Further Limit Ship Recycling Activity

The rise in freight rates, as a result of the crisis in the Red Sea, is expected to incentivize owners to refrain from selling their older ships for recycling. In its latest weekly report, shipbroker Clarkson Platou Hellas said that “market conditions remain similar to recent weeks as we head into the Christmas and New Year celebrations, with the lack of available tonnage continuing to frustrate the recyclers and leaving their facilities depleted. This may be a good thing as sentiment in India is muted with daily downward corrections in the domestic steel markets, thus this lack of supply may help to stabilise the situation and stop any negative response to price levels for any tonnage. Bangladesh and Pakistan remain limited in activity, continuing to be restricted by their financial implications that they have battled with throughout this year.

Meantime, the headline news this week in the shipping industry reflected on the worsening situation caused by the Houthi rebels in the Yemen/Red Sea area with the announcement by many ship owners that they will be diverting their tonnage away from this region. This could also prolong any recycling activity in the near future as freight rates have increased due to these diversions of their vessels from the area, creating longer voyages around the Cape of Good Hope. This will see a further utilization of the fleet and keep aging units in service and therefore away from the Indian sub-continent shores. There are no sales to report this week”.

In a separate note this week, Best Oasis (www.best-oasis.com), a leading cash buyer of ships for recycling, said that “as the holiday season of Christmas and New Year draws near, we extend our heartfelt wishes to our esteemed readers for a joyous Christmas and a prosperous New Year. The ship recycling industry has exhibited a sluggish pace of activity across all destinations. In the Indian market, there was a notable decline characterized by a decrease in prices up to 25 USD. Furthermore, it is worth noting that the demand for recycled materials and vessels is quite low. The current state of affairs in Bangladesh continues to exhibit a distressing condition, mirroring the circumstances observed in the preceding week, characterized by a prominent absence of demand and a complete absence of sales.

Currently, Pakistan is encountering challenges in the process of opening LC and managing a sluggish market. Turkey, a country that has experienced a period of notable progress in the past, is currently facing stress and is projected to undergo a decline in the near future. The price of oil increased by approximately 2% due to concerns among investors regarding potential disruptions to maritime trade and rising supply costs following an attack on ships in the Red Sea by the Iran-aligned Yemeni Houthi militant group”, Best Oasis concluded.

Nikos Roussanoglou, Hellenic Shipping News Worldwide