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Ship Owners Need to Step Up Demolition Activity For a Sustainable Market Rebound

With the news emerging from the demand side of the shipping market not particularly rosy, for reasons attributed to the various trade war fronts around the world, ship owners might have to turn to the supply side of things in order to improve the market fundamentals. This hasn’t been the case so far in the year, with demolition activity lacking in pace, compared to last year.

In its latest weekly report, shipbroker Clarkson Platou Hellas said that “it has been a fairly indistinctive week with very little activity to report due mainly to the Eid holidays that fell upon us. Apart from a couple of sales evidenced below, the scene has remained stable. The uncertainty surrounding the market is persuading many of the cash buyers to withhold from placing numbers on the table until the budgets are announced in Bangladesh and Pakistan (due 13th June and 11th June respectively), and having seen price indications fall significantly of recent weeks, Owners appear to be holding on to their units as only a scattering of tonnage is dangled in front of recyclers at this current time. Possibly, owners are hoping of a resurgence of optimism once the budgets have been announced but in addition, reports suggest that several cash buyers still hold a large volume of tonnage in their hands that were acquired at the previously high levels but as of yet, have been unable to obtain levels from the actual recyclers anything resembling break even, let alone a profit”, the shipbroker noted.

In a separate report this week, Allied Shipbroking added that “the subdued activity that had been seen during May has seemingly resumed during the first week of June. Slowly approaching the monsoon period as well as public holidays in several Indian SubContinent countries should start to slowly curb interest for new demolition purchases. Only a couple of deals were seen in the dry bulk segment during the course of this past week. The aforementioned reasons together with the general uncertainty prevailing the market in Pakistan has led local breakers to remain without any fresh purchases for yet another week. In Bangladesh, limited fresh appetite was seen, after a long period of increased interest from cash-buyers. Besides the Eid holidays, the upcoming budget determination and the lack of available slots have limited any further interest and speculative buying from sellers. Meanwhile, India, the only active market during this past week, saw some fresh enquiry, despite the worrying news regarding the fall of local steel prices”, Allied said.

In a separate note this week, GMS, the world’s leading cash buyer said that “the stagnating inertia in the international ship recycling markets continued this week, with Pakistan, Bangladesh and Turkey entirely offline due to Eid holidays (winding down the Holy Month of Ramadan) and the traditionally quieter monsoon season gradually getting under way in the Indian sub-continent. There was a brief bounce in the Indian market following the election victory of the pro-business Mr. Modi, but local steel prices have begun to cool off ever since and Alang Buyers appear notably reluctant to commit on new vessels as most of the market focus is now shifting to Alang, due to the overall intransigence from Pakistan and Bangladesh and the higher offers emanating from India. The market in Bangladesh remains the quietest of all, with the upcoming budget on June 13th likely to determine the immediate direction on prices, which have already lost USD 20 – USD 30/LDT over the last few weeks. Most yards in Chattogram also remain stuffed with tonnage and demand is at the lowest it has been all year, with essentially no new enquiries emanating from local Buyers. The expectation (as seems to be the case year-after-year) is that new duties / taxes are set to be announced in this budget and prices are likely to decline further thereafter. As such, Bangladeshi Buyers are no longer keen to import fresh tonnage before the date of the budget, given the likelihood of increasing duties within the next week”, GMS concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide

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