Demolition Activity Crawls to Near Halt
In s separate note this week, Allied added that “overall sentiment in the ship recycling market seems to have hit a “road block” this past week, with demo activity reaching an extremely sluggish pace as of this past week. The market had no allies to assist in providing market support, with both the overall positive freight earnings across most sectors and the deteriorating fundamentals working against the market for the time being. Moreover, this week the top ship recyclers so far (i.e. India and Pakistan) did not appear as aggressive in terms of offered scrap price levels as was witnessed the week prior, partly due to the festive season in Pakistan and Bangladesh but also due to the decrease in local steel prices.
More specifically, there was a w-o-w decrease of up to 3%. The market’s momentum is very likely to improve to some extent next week in the Indian Sub-Continent, as the Eid Holidays come to an end and operations and demand for steel are expected to show a recovery. Things are not looking to be so bright in Turkey at the moment, given the rapid increase in the country’s inflation and the decline in domestic demand for steel are constantly hitting the market”.
Meanwhile, GMS , the world’s leading cash buyer of ships noted that “sub-continent markets have taken a turn for the worse this week, as collapsing steel prices in India and Eid holidays in Pakistan, Bangladesh, and Turkey have led to depressed sentiments and virtually no new offers emanating on any available tonnage. Most End Users now want to wait-and watch-market developments before offering anew on vessels at far lower levels that seem more in line with the realistic USD 650s/LDT than the struggling USD 700s/LDT most in the industry were gunning for earlier on select units. There has certainly been some increasing and noteworthy reticence from sub-continent Recyclers about having to dip into levels at or above USD 700/LDT. So, there is perhaps some justification for watching-and-waiting if units can be secured at these currently lower levels.
Notwithstanding, despite this most recent volatility, fundamentals (including steel plate prices, which are at record highs of their own) overall remain firm across the sub-continent markets and the expectation is that appetite and sentiments will likely firm up once Eid holidays conclude from next week onwards, especially before the onset of June / monsoon season. There has been some worrying currency depreciations in all recycling destinations (India, Pakistan, Bangladesh and even Turkey) over the past few weeks and this week, the currencies depreciated across the board, despite capacity remaining firm to take the paucity of units that are available. Since supply is so limited at present (with all Dry Bulk and Container markets firm & Tanker charter rates starting to pick up again), recycling prices could possibly return to previous highs going into the traditionally quieter summer / monsoon season. Finally, at the far end, the Turkish market continues to gradually degrade, as fundamentals and prices both recorded further declines this week, as levels finally fall below USD 400/MT for dry units”.
Nikos Roussanoglou, Hellenic Shipping News Worldwide