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COVID Outbreaks Taking a Toll on the Ship Recycling Market as Well

Besides the obvious and tragic toll on human lives, when it comes to shipping, the pandemic is also having a negative impact in the demolition market. The latest outbreak, mainly in India, but in other countries as well, like Turkey, is taking a toll on ship recycling activity as well.

According to the latest weekly report from shipbroker Clarkson Platou Hellas, “the recycling industry this week seems to have ground to a steady crawl with so much uncertainty enveloping the domestic markets. With Covid-19 cases rapidly increasing in India and outpacing the vaccination rollout in the country, the local market looks precarious once again as the authorities tackle this latest surge. This has meant that cutting activities have had to slow once again at recycling yards, due to oxygen bottle shortages (no supply from 22nd April) as well as further lockdown measures that are being imposed. Most recycling yards are still particularly sparse due to the lack of tonnage that has been available to them this year, and more surprisingly, is the lack of tonnage circulated that have required HKC green recycling resulting in the Indian recyclers being left on the side-lines as the Bangladeshi, and recently resurgent Pakistani, breakers benefitting from.

Source: Clarkson PLC

However, with global steel prices remaining firm and Iron Ore soaring to a ten year high on the back of Chinese steel demand, the fundamentals for steel plate prices domestically to increase, and lack of available units, have meant that an aggressive buying appetite seems to be there from certain recyclers. With the impressive numbers on offer just below the mid USD 500/per ldt mark, the question is where will these price levels finally max out? Bangladesh continues to extend their lockdown on a weekly basis with only the Pakistan recyclers operating at anything resembling near normality”, the shipbroker said.

In a separate note, Allied Shipbroking said that “an increased number of transactions have come to the light as of late, given the robust offered prices from scrapyards and the poor freight scene in the tanker sector. However, concerns over the rising number of COVID-19 cases in the Indian Sub-Continent is expected to curb activity over the coming weeks, despite the strong interest being noted by end-buyers. In Bangladesh, the solid scrap prices, nourished from the increases in steel plate prices in the country has helped local scrapyards to hold a preferential position in the market.

Source: Allied Shipbroking

However, the pandemic concerns are considerable here as well, while the already high percentage of filled slots is likely to slowdown activity in the country, as we slowly approach the monsoon period. In India, things are of high concern regarding the spread of the pandemic, with all business activities having been put on hold. The demand for oxygen has redirected all of the countries inventories to be sent to hospitals, while movement restrictions have again been put in place. In Pakistan, we continued seeing anemic activity, despite the improved offered prices from local breakers”, the shipbroker concluded.

Meanwhile, in a separate report this week, GMS , the world’s leading cash buyer of ships, said that “the Covid scourge continues to afflict India with cases now breaching a record 320,000 per day and deaths approaching nearly 3,000 per day, as hospitals turn away patients and oxygen supplies are starting to run out. The world of shipping and ship recycling of course takes a back seat during this difficult time, with recycling yards shut as any available oxygen in the country is presently being diverted to battle the virus.

Source: GMS

Steel prices have started to cool off since, as product fails to shift from local yards and there is no telling when normal activities may resume amidst the ongoing lockdowns in the hardest hit states. It therefore is somewhat surprising to see End Buyers still looking to buy vessels given that vessel deliveries, customs services for boardings and clearances, and repatriation of crews / flights out of India are an ongoing uncertainty. Certainly for ‘as is’ deliveries, other countries are now shutting borders for Indian crew, placing many previously agreed deals in jeopardy. Bangladesh and Pakistan have not been as badly hit as India, even though cases continue to rise there and it is now a desperate race against time to get vaccines rolled out across the sub-continent, to try and halt what is an exponential surge. Covid cases in Turkey continue to climb too whilst the local market fundamentals are still lingering around the same region as those over the last couple of weeks, as Turkish vessel prices hold their ground”, GMS concluded.

Nikos Roussanoglou, Hellenic Shipping News Worldwide

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