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Ship Recycling Activity Held Back By Improved Freight Rates

With the freight rate market on a high note, especially in the dry bulk segment, demolition candidates have been scarce, not to mention the lack of buying appetite by scrapyards. In its latest weekly report, shipbroker Clarkson Platou Hellas said that “with the market slowly coming to the end of its summer hibernation and industry stakeholders gradually returning to their desks, a trickle of small ldt tonnage have filtered into the market and resulted in some marginal activity. However, with the severe lack of tonnage and activity in the past couple of months, there has not been a decisive market, especially as prices have fallen dramatically in this time. This has resulted in cash buyers not knowing where the value lies for each potential candidate and thus, what they are prepared to offer on the back of the uncertainty from the actual recyclers. We therefore feel it needs to be redefined, but a gentle flow of tonnage is needed to re-create a slumbering market and hopefully trigger it back into life, even if these rates are lower than what was experienced at the beginning of the year. Some believe that the recent decline in rates experienced have levelled out however some question marks remain as to whether this is truly the case or not which is creating this current uncertainty”, the shipbroker noted.

In a separate weekly report, GMS, the world’s leading cash buyer said that “the summer malaise that has set in to the primary international ship recycling destinations has continued for another week, with muted demand, declining offerings and despondent local fundamentals that continue to take a toll on respective local sentiments. In the subcontinent, India remains the lowest placed market with the recent 2% depreciation on the Rupee, which declined to over Rs. 72 against the U.S. Dollar and is presently around Rs. 71.60. This came at a time when the Rupee was trading around the Rs. 69 mark a few weeks ago, when local steel plate prices collapsed by about USD 75/Ton. As such, both fundamentals have been the primary reasons behind the poor pricing and weak sentiments”.

Source: GMS

GMS added that “in Pakistan, cheap billets from Iran continue to undercut local plate prices, resulting in accumulating inventories at local yards. A similar situation has also been brewing in Bangladesh as imports from China have been suppressing local plate levels. As such, steel plate prices remain under pressure across the board, as recyclers with inventories at local yards have been struggling to shift these at anywhere near breakeven levels. Even Turkish Recyclers were hit by declining plate prices as levels fell rapidly during the course of the week, resulting in a diminutive interest and plummeting local offerings that are trying to chase down the crashing steel prices. Notwithstanding, the one saving grace for all markets has been the wilting supply of tonnage as firming charter rates across all sectors accompanied by today’s lower scrap realities in the mid USD 300s/LDT (and mid USD 250s/MT in Turkey) are failing to tempt Sellers with older vessels to sell. Just how much longer this will last with 2020 around the corner, remains to be seen. There remains hope that post monsoon, as the 4th quarter progresses and inventory starts to shift from local yards, prices should start to stabilize and recover. Although, it does increasingly seem as though levels from the heyday in the mid (and higher) USD 400s/LDT are likely gone. For the time being, end Buyers, Cash Buyers and Ship Owners are having to re-adjust their pricing expectations on any of the expensive unsold inventory, despite layup and trading options presenting themselves on various vessels”, GMS concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide

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