Demand for Ship Scrapping Increases, But Supply is Lacking

The ship recycling market is still lacking in activity, despite the fact that demand for ships is there. In its latest weekly report, Best Oasis (www.best-oasis.com), a leading cash buyer of ships, said that “the current position of the ship recycling industry in India is unchanged from the previous weeks. The demand for vessels and scrap is very low, with a limited possibility of improvement in the next month, but the outlook is uncertain. Bangladesh is currently adopting a more vigilant stance, with recyclers awaiting a market correction before intensifying their efforts; only after the market improves will we observe the recyclers increasing their activity”.

Best Oasis added that “in Pakistan, the general election of February 8th has resulted in a chaotic environment characterized by instability and a delaying release of the results, leading to increasing tension. Turkiye is now facing negative circumstances as the market has had a downward trend, resulting in a fall of 3-4 USD in both imports and local trade. In general, the recycling industry is now facing noteworthy hardships. The global economy is currently facing challenges due to increased interest rates and decreased external demand. This has slowed down economic growth and created a cautious business environment worldwide. In its Q1 2024 update, GlobalData forecasts a continuation of the global economic slowdown for the third consecutive year.

The projected growth rate for 2024 is 2.1%, which is slightly lower than the estimated 2.4% growth recorded in 2023. Amidst the ever-changing economic landscape, the Asia-Pacific (APAC) region is positioned to take the lead in 2024, boasting the highest growth rate. Nevertheless, the growth projection for APAC suggests a decrease compared to last year as a result of the economic challenges in China. The outlook in the Middle East and Africa (MEA) region continues to be uncertain, primarily because of the ongoing geopolitical tensions and reductions in oil production. There is expected to be a decrease in growth for the Americas region, with a projected slowdown to 1.1% in 2024 compared to the previous year’s 2.2%. The European region is expected to experience a modest recovery in 2024, with the alleviation of energy supply concerns and the cost of living crisis”, Best Oasis concluded.

In a separate note, shipbroker Clarkson Platou Hellas said that “as we enter Chinese New Year (Year of the Dragon), the recycling market certainly does not resemble the reputed attributes of the dragon – the market is most certainly not feeling endlessly energetic and full of vitality. There is now more demand for ships from Bangladesh and India, however the Indian market is falling by the wayside with no intent of trying to compete with their counterparts and only green recycling tonnage looks set to head to the Alang shores, if and when they become available. The major disruption to the shipping industry in general, caused by the Red Sea and Russian/Ukraine conflicts and limited Panama Canal transits, is driving freight rate spikes and charter gains in both the wet/dry and container sectors, the latter especially bouncing back to rates seen during the Covid period. It remains to be seen exactly how long the recent impact from the Red Sea disruption will continue, but the potential recycling looks set to be ‘pushed back’ again towards 2025 whilst these elevated freight rates persist”, the shipbroker concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide