Ship Recycling Activity Grinds to a Near Halt
Perhaps rather ominously, the ship recycling activity has gradually slowed down to a near halt over the course of the past few days. This development couldn’t have come at a worst time, given that the freight markets could use a little jolt, through a tonnage supply reduction.
In its latest weekly report, shipbroker Clarkson Platou Hellas commented that “several factors are currently against the marketplace at this current time resulting in a lull in activity. With the commencement of Ramadan, approaching monsoons, elections in India and the forthcoming budgets in Bangladesh and India, the busy scene witnessed over recent months seems in the distance and the slowdown in activity and inquiry from the recycling yards looks apparent. Interestingly, and despite weak freight rates in most sectors, there is a lack of tonnage availability and therefore, the subdued market conditions we are now experiencing could last through the next few months with possibly a trickle of sales to report over this time. We understand that the steel market weakened slightly this week in India, but encouragingly, reports suggest the Pakistani breakers are keen to acquire units, but, at price levels they are comfortable with and we do not expect any drastic change in their current indications which are ranging lower compared to those seen recently from Bangladesh. Incredibly, there is apparently only a total of 22,000 LDT overall throughout the recycling yards in Pakistan which proves what an inactive year it has been for these recyclers”, the shipbroker said.
On a separate note, GMS, the world’s leading cash buyer of ships, said that “the first signs of decline have started to set in on the industry, ahead of the traditionally quieter monsoon season that’s just around the corner. For some time now, there has been the lingering anticipation that the Bangladeshi market is due for a period on the sidelines, as a result of over extending themselves on the multitude of high-priced vessels sold for recycling so far this year. The Bangladeshi budget is also due on June 13th, 2019 with rumors around new duties / taxes on the domestic steel sector making the rounds, which in turn has led to increased nerves and reduced / minimal offerings on any working vessels that may arrive after or close to this date. On the other side, the Indian market endured another harrowing week with both local steel plate prices and the Indian Rupee registering noteworthy declines over the course of the week, subsequently carving out a new reality on pricing for vessels being negotiated”.
GMS added that “Pakistani Recyclers have virtually remained out of the buying, although they may be pleased to see that declining offerings from competing neighbors may inadvertently drop them back into the game, especially if the current trend persists much longer. On the global end, the recently resurfaced US – China tariff squabbles have also done little to reduce Recycler (especially Indian) anxieties as stock markets endured another turbulent week as well. All of this leaves the Indian subcontinent markets in a precarious position, heading into the traditionally quieter monsoon / summer months. For the time being however, the supply of tonnage and whether Owners will keep chasing the market down, remains the big question, given that charter rates – particularly across the beleaguered dry bulk (and to a certain (lesser) extent now, container sector) – continue to struggle. Finally, Turkey, like India, suffered through declines in local steel plate prices and the currency as well, as its local offerings deteriorate in kind”, GMS concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide