Demolition Market Struck by the Coronavirus

The effects of the outbreak of the Coronavirus appear to have also hit the ships’ demolition market. In its latest weekly report, shipbroker Clarkskon Platou Hellas commented that “we have witnessed a mixed week for the ship recycling industry, but again one with plenty of talking points and a few more sales to report. The spread in pricing from India to Bangladesh was further stretched this week with India continuing to lead the way. Their market in Alang has remained stable, despite the seemingly large volume of available tonnage in circulation and has even attracted those vessels previously sold earmarked for Bangladesh”.

“However, and as has become the norm since the 2019 Ship Recycling Bill was passed last year, these local recyclers at Alang are primarily still seeking to acquire tonnage for Green recycling and the more specialist type of units. Interestingly this year, we are seeing a surge of private off market sales taking place, and this week was no exception. It is reported that a further two capesize bulkcarriers have been committed for a recycling sale, away from the prying eyes of the trading environment. These units were reportedly concluded several weeks ago as they have suddenly appeared on the latest arrival list at Chattogram anchorage in Bangladesh and have added to the ever-accelerating tally for larger dry tonnage sold this year. On pricing, we are certainly seeing a downward pressure each week from Bangladesh as their domestic steel rates weaken daily, however the indications from both India and Pakistan show no sign of change for the foreseeable future, either up or down. With limited yards now available in Bangladesh and local banks becoming ever more stringent in opening Letter of Credits, it will be a market that everyone has their eye on if to see whether they can cope with the continuing wave of Capesize bulk carriers and VLOC’s being made available. Next week, and despite the panic being caused by the Coronavirus, we have the annual Tradewinds Ship Recycling Conference taking place in London where industry players congregate to debate topical issues and the future of the industry. This is always a key event in the yearly programme and one that can often prove to provide a small catalyst for market sentiment as is it annually seems to drive a positive manifestation into buyer’s minds. Let’s see if this continues into next week!”, Clarkson Platou Hellas concluded.

In a separate note this week, Allied Shipbroking added that “with concerns over further freight market deterioration, the ship recycling option has already started to swirl in the minds of most owners. It is therefore of little surprise that we continue to see a fair flow of units being sold to the breakers again this past week. Most of these units belong to the dry bulk sector, as this is the sector that has been the most badly hit by the Coronavirus outbreak. Bangladesh is still the first option for most in the market right now, but with more and more sellers looking with increased interest at the alternatives as of late. Meanwhile, India which had been able to attract some of the excess activity noted since the start of the year, has started to lose some ground due to a weaker Indian Rupee and lower local steel plate prices. However, it is worth mentioning that offered prices from Indian breakers are still the most competitive in the market right now. Finally, Pakistan remains in a trailing position, unable to muster the offered price levels needed to snap up some of the tonnage that has been circulating markets as of late”.

Meanwhile, GMS, the world’s leading cash buyer said this week that “as international stock markets suffered some of the worst losses since the financial crisis of 2008, international recycling markets are reacting in a similarly negative fashion, with the Indian Rupee and Turkish Lira tumbling drastically, local steel prices reversing, and an almost complete lack of serious offers coming forth from Recyclers looking for tonnage. Much of the ground gained over the course of the year thus far, seems to be ebbing away as nearly all recycling markets enter bear territory – off the back of the worrying situation concerning the COVID-19 virus, and its subsequent impact on global supply chains and international markets.

Nearly all sectors are suffering at present, as forecasts are radically altered and as many Ship Owners are looking to retire their older assets. The problem is that every new purchase is now being done at increasingly declining levels and there is little optimism that rates will sustain or indeed improve any time soon. We are now in a situation where Owners and Cash Buyers alike, are chasing down the market at ever more depressing and (clearly) unattainable numbers – such has been the supply of vessels over the last several weeks that it may be worth allowing some stability to return to the markets, rather than panic selling and inundating recycling locations with an unsustainable number of units. There are also increasing restrictions on vessels arriving from China and other virus hit areas, with enforced quarantines of at least 14 days now prevalent in both Alang and Chattogram, before crews can disembark and vessels can be delivered / beached”, GMS conclude.
Nikos Roussanoglou, Hellenic Shipping News Worldwide