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Reopening of Economies Triggers More Demolition Activity But Only Just

The ship recycling market seems set for a rebound of activity, as more and more economies reopen after lockdown measures. However, things are still pretty tentative. In its latest weekly report, shipbroker Clarkson Platou Hellas said that “with the start of summer now officially upon us, much needed positive sentiment has emanated across Europe in particular as the battles against the Virus has improved dramatically, but there still remains caution in the hope of no ‘second wave’ taking place, but the rest of the world still sadly battles Covid-19 and this remains very much the case in the Indian sub-Continent. With the easing of varied lockdowns, Sellers and Buyers have been helped to slowly start their planning on when to fully return to offices which is hoped will re-engage Sellers to start assessing their vintage units and provide more discussions amongst stakeholders in the industry, thus leading to more workable tonnage for the market”, the shipbroker said.

Source: Clarksons Platou

“However, Indian recyclers are still not anywhere near full capacity and are operating at between 30% and 40% of their capability and many predict their full labour force will not return for at least another month. This also presents its own challenges as we settle in for the Monsoon season which will incapacitate recycling yards further, just as they start to try to return with a strong buying appetite. As reported last week, the large amount of green tonnage being proposed in the market is filling up the available yards in India which could start putting a strain on their latest prices, particularly if we see another influx of Owners looking for this type of recycling.. The collection of sales below show the market was not all but completely quiet this week, but a distinct lack of general market chatter and rumours has made it start to feel like summer is here where many take their foot off the gas, when what is needed is the opposite due to the distribution caused by the Covid-19 and backlog of tonnage needed to be recycled”, Clarkson Platou Hellas concluded.

In a separate note, Allied Shipbroking said that “activity may not be very impressive for the time being, but it has returned to much healthier levels after the re-opening of the Indian Sub-Continent markets. Meanwhile it is worth mentioning that the majority of units being sold for scrap as of late are containerships, reflecting the slight imbalance that seems to be taking place in this sector. With regards to demolition destinations, Bangladesh seems to have started to regain interest, with local breakers there starting to offer very competitive prices compared to the other Indian SubContinent markets. In contrast to Bangladesh, appetite amongst Indian breakers seems to be very limited as of late, with offered prices having slumped to levels not seen for some time now. Additionally, rising COVID-19 cases in the country has intensified concerns of a possible 2nd lockdown taking place. Finally, Pakistan has reclaimed some of its attractiveness as of late due to healthier fundamentals, with some fresh units arriving now at Gadani. However, despite the increases noted in offered prices, local breakers are still trailing behind in competitiveness compared to Bangladeshi breakers”, the shipbroker concluded.

Source: Allied Shipbrokers

Meanwhile, GMS, the world’s largest cash buyer of ships said in its latest report that “India continued its depressing downward spiral this week, with all market sales into Alang reportedly taking place below the USD 300/LDT mark, all while a resurgent Pakistani and Bangladeshi market managed to pick up the remains of mostly non-green tonnage currently making the rounds. The fear in India is of an oversupply of HKC green tonnage, when in fact, many Ship Owners are choosing to withdraw / hold on to their units for the time being, rather than commit their vessels at the risible rates currently on show. We have not faced such a lowly recycling industry since the dark days of 2015 / 2016, when this most recent ship recycling recession was in full swing and rates in the region of USD 250/LDT (and below) were commonplace, due to the collapse in steel prices on the back of Chinese exporters dumping a lot of cheap steel into the international markets. Notwithstanding, ever since anti-dumping duties were introduced to counter this, scrap prices have since soared, but the recent Covid-19 and resulting economic downturn coupled with the ongoing oversupply of vessels for recycling has once again seen prices collapse. If the supply of vessels continues at the current unsustainable rate, recycling prices may continue to fall further. Yet, given the fact that fundamentals have been fairly firm (of late) and some of the coronavirus restrictions set in place have seen conditions starting to improve across the sub-continent markets (especially in Bangladesh and Pakistan), most are hoping for the improvements to continue in the months ahead. Lastly, in Turkey, steel plate prices have weakened marginally this week, resulting in local offerings on available tonnage to retreat in kind”, GMS concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide

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