Lack of Tonnage Still Plaguing the Demolition Market

A lack of tonnage has continued to plague the ships’ recycling market this week. In its latest weekly report, shipbroker Clarkson Platou Hellas said that “as we turn the page on another week, the story remains repetitive as there continues a lack of tonnage supply due to the ever-improving charter markets and second-hand values. We certainly feel like we are crawling slowly towards the summer months despite strong demand/inquiry again from the end recyclers as they seem to have come to the realisation that the year ahead will without doubt be challenging, as they battle for what little units will be proposed in the coming months. In addition, the Pandemic is a changing situation that once again seems to be causing concern with ‘as-is’ deliveries, especially in Singapore. These further complications may result in more delivered type transactions going forward, to avoid the challenges caused by COVID-19 with more areas entering further restrictions”, the shipbroker said.

In a separate note, Allied Shipbroking said that “the significant improvement being noted in steel prices during the last few weeks has helped interest among owners of vintage units to augment. Meanwhile, the resuming uninspiring scene in the tanker freight earnings is also a bullish factor for the ship recycling market, which is though counterbalanced by the record earnings being noted in the dry bulk and containership markets. The country that has been the most effective in taking advantage of the improved steel prices so far has been Bangladesh, where slots are starting to be filled gradually, mainly by vintage tanker units. The favorable conditions for local scrapyards are likely to still hold in the following weeks.

Closely following Bangladeshi breakers, Indian scrapyards were able to attract some fresh tonnage, especially on HKC deals. Given the improved offered prices and the attractive exchange rate of the Indian Rupee, we expect more sellers to turn their interest here over the following period. In contrast, Pakistan was not able to “steal” a considerable market share during the past few weeks, despite the healthy fundamentals and “good” offered price levels. However, we are likely to see an move of activity towards Gadani’s yards as well during the coming weeks, as an alternative choice with increased available capacity right now”, Allied said.

Meanwhile, in a separate note this week, GMS , the world’s leading cash buyer of shipssaid that “markets have fired up once again this week, particularly in the impressive Bangladeshi market, which continues to outshoot its competitors (despite the best efforts of a resurgent Pakistan) and there are finally a couple of choice, large LDT units in the market to offer to hungry End Buyers. So far this year, the markets have already seen supply starved at times and this has led to some exuberant offerings from Cash Buyers and End Buyers alike, in order to secure some of the favored vessels that have come on offer thus far. Local fundamentals too appear to be supporting such exuberance (for now) with steel plate prices having firmed up even further in Bangladesh this week. Even the Turkish market has reported no negative movements this week, with the Lira firming its way back towards the TRY 7.X mark and fundamentals relatively unchanged.

Overall, demand remains good in all markets as well with capacity decent on subcontinent plots. Hence, it can be expected that these levels should persist for the next month or so at the very least, as high as they seem in the grand scheme of pricing over the last few years. Moreover, freight rates in the dry and container sectors continue to firm and this is leading to a shortage in these types of vessels. As such, it is mostly offshore units and now (increasingly) tankers that are supplying the red-hot demolition markets. These days, it is crucially important to reiterate the importance of delivering vessels gas free for hot works clean into all sub-continent markets due to the increased restrictions / regulations around permitting the import of wet units into the subcontinent destinations for recycling. The standards to allow entry into local scrap markets indeed is higher even than for vessels going into dry dock. All cargo and slop tanks must be totally cleaned of all cargo residues, slops and sludges, further than the man height cleaning that was previously acceptable”, GMS concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide