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Robust Demolition Activity Indicates Shipowners’ Willingness to Let Go of Older Tonnage

With a global recession raging once again, as a result of the pandemic, ship owners are more inclined to let go of older, non-viable tonnage. In its latest weekly report, shipbroker Clarkson Platou Hellas said that “a blast from the past on two occasions has emerged this week. Firstly, in Bangladesh, a new cartel has been formed on the back of some recent high priced acquisitions from some cash buyers and the domestic recyclers have decided to establish this cartel to grind a halt to unnecessary escalating price levels. Unlike previous years, the recyclers have this time round unanimously approved this committee formation but as always, the question is long this will last this time round. As proven in previous cartels, losing tonnage regularly to their counterparts in India and Pakistan could dissolve the cartel as quick as it started. Without being too pessimistic, time will tell whether this cartel is successful or not as from past experience, they rarely last the course and often break down quite quickly. For ease of reference, it is rumoured that the cartel have set up the following price caps: 5/10,000 ldt bulker – USD 340/350 per ldt Larger bulkers up to VLOC’s – USD 350/355 per ldt Tankers – USD 360/370 per ldt Containers – USD 355 per ldt However. At these price levels India and Pakistan will be more competitive for any available tonnage”.

Source: Clarkson Platou (Hellas) ltd

According to Clarkson Platou Hellas, “the second piece of interesting news to resurface, again something that has been openly talked about for several years, is the proposed opening of a ship recycling destination in South Africa, then plan of which is to create a Hong Kong Convention compliant ship recycling facility on its west coast. The site, to be called 34South, is intended to be located in the Saldanha Bay Industrial Development Zone, offering a location for those vessels ending their trading life in the vicinity. Reports suggest the facility will use a ship lifting system, ensuring that vessels are decommissioned in an environmentally safe manner compared to the beaching method widely used elsewhere. It will be interesting to see whether this new plan does actually materialise or if it is just another flash in the pan idea as seen in the past”, the shipbroker concluded.

Meanwhile, in a separate note, Allied Shipbroking said that “activity this past week was not so impressive compared to the overall activity we have been witnessing of late, but remained robust, while we do expect to remain at close to these levels for the final few months of the year. In Bangladesh, the rumors regarding a potential cartel taking shape amongst domestic breakers seems to have materialized, with breakers in the country wishing to avoid any further rally in offered prices taking shape right now. However, it is important to remember that the last time such an agreement was made in the country, it was dissolved relatively quickly due to the increased competition that emerged from other Indian Sub-Continent destinations. In India, activity seems to have started to follow a declining path due to weaker steel plate prices and concerns over the COVID-19 situation in the country that could potentially lead to a second lockdown taking place relatively soon. Finally, the ramp up noted in Pakistan as of late seems to still hold some steam, as interest remains vivid in the country. However, the available slots have been limited due to the previous spike in activity, trimming as such the number of fresh enquiries”.

Source: Allied Shipbroking

In a separate report this past week, GMS (http://www.gmsinc.net/), the world’s leading cash buyer of ships, said that “the prominent news this week centered on the formation of yet another cartel in Bangladesh, which is another attempt by a handful of powerful local Recyclers to try and secure vessels at controlled, below market prices. Every few years, we see these attempts being made. Yet, all this does is reduce the competitiveness of the Bangladeshi market and the fallacy of it all sees the cartel break up in a very short period of time (within days, if not a few short weeks). Furthermore, with Pakistan and India remaining competitive, there is every chance that Bangladeshi buyers will likely lose any and all market tonnage to their sub-continent neighbors. Several VLOC sales in recent weeks have reportedly been concluded to Pakistani and Bangladeshi End Buyers and a majority of the most capable (in terms of L/C limits) and keen End Buyers are starting to (if not already) fill their plots with large LDT tonnage once again. India remains the HKC green destination of choice (with almost 80 HKC approved yards with NK, Rina, LR classification societies) and there is now a trickle of green deals every week to consider – especially as container candidates start to slow from many of the major liner owners amidst an uptick in charter rates.
Finally, key Turkish fundamentals recorded declines this week resulting in levels for ships slipping marginally”, GMS concluded.

Source: GMS

Nikos Roussanoglou, Hellenic Shipping News Worldwide

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