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Demolition Market Could Heat Up For Tanker Units Soon

Things could start to heat up in the ships’ demolition market, as more and more tanker owners are contemplating selling their older units. On the back of this trend, should Pakistan elect to uplift its ban on tanker imports, as is widely rumored among the industry, the market could firm up pretty quickly.

In its latest weekly report, shipbroker Clarkson Platou Hellas said that “as more larger tanker units are talked in the market this week, there are ‘stronger’ rumours emanating from Pakistan that the ban on importing tankers will be lifted. However until an official announcement is made, we cannot predict anything at this stage as we have been down this road of ‘opening, not opening’, for the last 12 months. The only point to make, and for all to understand is, that if and when it reopens and allows the import of tanker units again, nothing will happen immediately as it will take some time to ascertain the new regulations and comprehend any new formalities that are put in place by the local authorities. Any cash buyer speculating with firm prices on the basis of this market reopening at the end of this month, as hinted, could be risking a big exposure should these rumours fail to become reality.

Whilst many units are now being talked into the market, the same argument remains that there appears to be a lack of definite workable tonnage on offer to Buyers. With this in mind, any sales are very competitive and gives the opinion that the market still remains in 4th gear and is not at its most fluid, nor is it particularly transparent with huge disparity over pricing from every buyer, each having their own ideas as to where this market is. Interestingly, several units that cash buyers purchased at the beginning of the year remain unsold which fuels further suspicion that the domestic markets are not as aggressive as would seem. Only time will tell after the latest small cluster of sales reach the waterfront and we then see which destination is the most stable market and attracts more confidence from the cash buyers”.

In a separate note, Allied Shipbroking added that “there seemed to have been a jump in the level of activity being noted in the recycling market, showing a sharp turn compared to what we were seeing one week prior. This came just in time to soothe somehow the overall thinking of a market that may well have reached a peak in the overall activity we would see moving forward. For the Indian Sub-Continent, things in India have remained firm, with Cash buyers still eager to gather as many demo candidates as possible and compete heavily on any promising tonnage that comes to market, holding a positive sentiment at the same time, following the announcement of the Indian Budget. Bangladeshi buyers have remained relatively close on the heels of their Indian counterparts, committing a fair share of tonnage sent for scrap recently. Pakistan seems to still be in a state of flux, with an eerie pause having taken place of late. It is true that the improved picture in terms of earnings combined with the upward trend of sentiment in the Dry Bulk sector has resulted to a tighter availability in demo units. There still seems to be a fair amount of demo candidates emerging from other sectors, allowing for this relatively fair flow of sales reported this past week”.

Meanwhile, in a separate note, GMS, the world’s leading cash buyer of ships, said that “following on from last, another flat week concluded in the recycling markets as a steady reluctance from recyclers to pay some of the ongoing exorbitant Cash Buyer asking prices and some reverberating volatile fundamentals (in tandem with the recently rocky international stock markets) started to tell of a nervous sub-continent recycling market. Indeed, local steel plate prices suffered another set of worrying reversals midweek (just as global stock markets started to plunge), only to find their feet in the final few days of the week, subsequently bringing some needed relief to the anxious ship-recycling sector. Several Cash Buyers are still hoping that the markets hold going into the traditionally quieter Chinese New Year holiday period, as there remain several expensive and unsold vessels in a variety of hands, all of who will be hoping for further market gains in the days / weeks ahead (rather than any declines that could prove disastrous).

Meanwhile, the VLCC market continues to shed tonnage at pace as news of yet another unit being committed, surfaced this week. This has taken the total to almost 10 units sold / beached for the year already! Overall, it does seem increasingly clear that prices will likely not breach the USD 500/LDT mark any time soon (as many were hoping for), despite some clearly over exuberant market sales having been concluded through early 2018 (which have eventually lost the relevant Cash Buyers considerable amounts on their trades). As the Chinese New Year holidays commence at the end of the coming week, it could be a quieter period (in terms of overall supply) and this should give the markets a chance to steady themselves for a renewed push on levels as February concludes”, GMS concluded.

Nikos Roussanoglou, Hellenic Shipping News Worldwide

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