Demand for Ship Recycling in Healthy Level, Despite a Lack of Candidates

Demand is pretty vivid in the ship demolition market, despite an apparent lack of enough ship candidates. In its latest weekly report, shipbroker Clarkson Platou Hellas said that “this week has certainly raised concerns in the market following the unrest between Russia and Ukraine which is creating some major uncertainty. Whilst it is early days, regarding the current situation, which continues to evolve, developments so far do not appear to be preventing Russian crude and products exports and it remains to be seen whether any sanctions or caution being exercised by market participants leads to any significant disruption. In the meantime, tanker freight rates for cargoes loading in the Baltic and Black Sea have increased very sharply, with knock on effects on other routes. The longer-term impact continues to be uncertain, while we await further developments and while market participants assess any risks and uncertainties that may affect tanker loadings. The potential oil price impact of any disruption could also be very significant and bunker prices are already elevated partly because of these tensions.

The increased bunker prices may also affect price levels for those units being circulated for recycling on an ‘as is’ basis as these buyers will have to factor in the cost of bunkers to move the vessel from the delivery place to the final recycling destination, unless of course they are included in the sales price. On the dry side, considering the uncertainty of events, the Dry Bulk freight market sentiment has turned more negative, like most financial markets and we are now certainly witnessing more discussing on the capesize bulk carriers, however whilst we are hearing of some such units being negotiated, no actual sales have been concluded this week. The surprising element this week is the lack of sales to report. We are hearing of several private deals being negotiated in addition to plenty more units being circulated as potential candidates, but it would seem Owner’s expectations are greater than the current historically high rates on offer from the recycling Buyers”, the shipbroker concluded.

In a separate note, Allied Shipbroking added that “things in the ship recycling market continue to hold at positive levels for yet another week, while showing at the same time a slight increase in offered price levels. Within the Indian Sub-Continent, Bangladesh continues to lead the market in terms of offered price levels. Given the current Russian-Ukraine crisis that has unfolded, there are also signs of a potential increases in their offered price levels in a proactive stance so as to prevent any potential losses in the flow of units being beached. On the other hand, Pakistan seems to have taken a step back waiting for the “dust to clear” before taking any strong stance. In the Indian market, there has been a slight increase in momentum and buying appetite, something that has helped boost offered price levels as of late. Furthermore, given that tanker units are still the main pool for demolition candidates, the recent developments in their freight market could mean that even this sector might dry up in the short-run, amplifying competition amongst breakers even further. In any case, we need to see the developments of this current crisis as it will underpin to a significant extent the scrap tonnage available as well as which direction price levels will be able to take”.

GMS , the world’s leading cash buyer of ships added that “sub-continent markets remain firmly poised for another week, particularly in Bangladesh and a now resurgent India. Pakistan, as seems to be typical for the market there, has gone quiet over much of the international uncertainty surrounding the possible outcome of the recent Russian invasion of Ukraine. Bangladeshi Buyers have in turn, ramped up their buying and price offerings, mindful of the fact that some increased oil / gas prices due to the unfolding crisis in Ukraine, in addition to the inevitable sanctions that may starve Ship Recyclers of a supply line of ships for a short time.

Steel scrap prices have improved significantly in Bangladesh and India this week, leaving both markets positively poised going into March, whilst Pakistan slows down and waits to watch the international situation and subsequent market developments. The Turkish market remains especially poised to suffer from the outcome of the Ukrainian invasion, with the supply of import of steel likely to be affected. Should this happen, we can possibly see import steel (and likely) ship offerings from Turkey firm up for a short period. Overall, Putin’s disgraceful actions of the Russian invasion of Ukraine has certainly shocked the world over and the raft of justifiable sanctions is likely to have a profound impact on the shipping world – especially when negotiating state owned sanctioned Russian tonnage, which of course will restrict them from heading for recycling shores. As it stands, despite the ongoing international turmoil, recycling markets keep giving owners a viable end of life option at fantastic decade long high levels, while freight rates too continue to perform admirably at present”, GMS concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide