Demolition Market “Confusing” Says Shipbroker
Over the course of the past couple of years, things were pretty straightforward when it came to the demolition market. More ships were headed for scrap, as ship owners were inclined to sell their older ships, to balance the ailing freight markets. So far in 2019, though, things aren’t that simple, as more parameters have to be taken under consideration.
In its latest weekly report, shipbroker Clarkson Platou Hellas said that “we remain in what can only be described as a very puzzling and confusing market with brokers and cash buyers at the edge of their seats still waiting for the anticipated surge of new tonnage to kick-start their year. This has led to a large spread of prices being indicated from Buyers as no one really knows the true pricing positioning and really depends who has the appetite at a particular time. These are certainly precarious times as whilst there is clearly a lack of tonnage for sale, price levels from the waterfront remain free from fluctuation which, contrary to past sentiment, is intriguing given the low supply of vessels as normally this would signal a firming of rates. This clearly proves perhaps that there is an underlying scenario at the recycling yards where there is interest to buy tonnage, but the end users will not raise their game in a speculative fashion to draw units to their yards. However, it is generally felt, for the time being, that price levels look set to remain stable because of the dearth of tonnage and the sharp increase in iron ore ($88 per ton at the time of writing) which is often a strong barometer for steel markets globally. Bangladesh banks still seem to be struggling to open their letters of credit, which could potentially have an impact on prices, but for the moment themselves and India maintain their position at the forefront of the majority of concluded sales and we are yet to see Pakistan back in the competitive frame as it remains on the side lines peeping at its subcontinent neighbors and almost being averse to put numbers on any available vessel. This is especially surprising as it was felt that after its ban was lifted on the importing of tankers, they would come back into the market firing on all cylinders and lead the way for pricing. This has not materialized however, and they look set to remain in the doldrums for the time being. One possible reason behind this muted period could be that Iranian steel that is being dumped cheaply into the country via other nearby countries is affecting stock piles and reducing steels mills requirements of the conventional method of scrap steel from ships. This ongoing struggle for these particular recyclers looks set to remain for some time”, the shipbroker concluded.
Meanwhile, GMS, the world’s leading cash buyer, said this week that “markets have begun to stabilize in the sub-continent this week, with India gaining some ground off the back of steel plate prices that improved for much of the week, even though they ended the week at nearly the same levels. This returned some sorely needed optimism to the Indian market, which could in turn, deliver some relief to a stuffed Bangladeshi market, where the influx of tonnage has been unrelenting since the beginning of the year. Pakistan remains stationed some ways behind their sub-continent competitors for yet another week and has seen an absolutely minimal number of vessels arriving local anchorage so far this year. Given the overall performance of this market over the recent past, this year could be a rough one for Gadani Recyclers (in terms of potential purchase of LDT / local consumption of vessels). Lastly, Turkey continues to chug along as a further (albeit relatively minor) improvement in steel plate prices continues to keep local sentiments firm and levels moving gradually on the up. Overall, with tanker rates dropping this week and dry bulk rates stuck in the doldrums, the supply of ships is potentially expected to pick up in the weeks / months ahead. Meanwhile, Cash Buyers remain focused on offloading their expensive unsold units (that were purchased towards the end of last year) at ever decreasing levels. However, with prices now stabilizing across the board once again, we may likely see some renewed vigor to the buying in the coming week(s). In other news, the ratification of the Hong Kong Convention on the safe and environmentally sound recycling of ships by the Netherlands is scheduled for next week i.e. on Wednesday, February 20th. After Belgium, Congo, Denmark, France, Norway, Turkey and Panama, this would make the Netherlands the 8th country that has ratified the Hong Kong Convention”, GMS concluded.