Ship Recycling Market Caught Between a Rock and a Hard Place

Conditions in the ship recycling market have been quite challenging over the past week. In its latest weekly report, Best Oasis (www.best-oasis.com), a leading cash buyer of ships said that “the ship recycling industry faced a challenging landscape this week. In India, the market is experiencing a significant downturn, with minimal demand and a shortage of vessels, leading to a standstill in new deals and weakening international competitiveness. In Bangladesh, the market saw lack of demand, causing local prices to drop by 500 to 1,000 Taka ($5.85 to $11.70 USD) with potential for further declines in the coming week, creating uncertainty about future trends. Pakistan’s market has partially reopened, with initial signs of growing demand and stable steel rates, and potential increases are expected as the market adapts to the recently implemented budget.

Meanwhile, Türkiye’s market conditions remain stable but lack momentum, with the industry anticipating increased tonnage to drive future activity and growth. The International Monetary Fund (IMF) has warned that the U.S. government budget deficits and escalating debt pose “a growing risk” to the global economy, overshadowing an otherwise strong economic performance. The IMF emphasized the “pressing need” for the United States to reduce its debt burden over the next several years. This may necessitate broad-based income tax increases and cuts in popular entitlement programs, according to the fund’s annual review of the U.S. economy. Global steel production increased by 5.7% from April to May, reaching 165.1 million metric tons, as reported by the World Steel Association. This growth also pushed the industry 1.5% higher compared to the same period last year”.

According to Best Oasis, “in India, the market is facing a persistent decline with little to no demand, and there is a notable shortage of available vessels; consequently, no new vessel deals have been concluded due to the current market situation. Indian buyers are struggling to compete internationally, as the ongoing downward trend has significantly impacted their competitiveness against global counterparts. Market typically experiences lower demand during the monsoon season, following historical trends. However, the current market is highly unpredictable, making it difficult to rely on past patterns for forecasting demand. Indian steel exports are facing challenges due to China’s overcapacity and weak domestic demand, leading to a global market flooded with cheap steel. In May 2024, India’s steel exports dropped nearly 25% month-on-month”.

In a separate note this week, shipbroker Banchero Costa said that “while demand still remains, the positive sentiment we have seen across the Indian Sub-Continent markets earlier in the year has changed course. With prices correcting about $20-30 LT/LDT across the three markets. This weaker sentiment is perhaps typical of the time of year, when monsoon rains dampen activity but also in part due to local steel plate prices coming off coupled with currencies deteriorating. In Bangladesh the Taka ended the week at levels breaching BDT 117.55 against the US Dollar. There remains little to report by way of interesting sales, an elderly Handymax bulker the 48,200 dwt Kmax Pro (built 1997 / LDT 7226) which has suffered fire damage has been auctioned as scrap by Malaysian Courts, on a ‘as is’ Malaysia basis, however a price has yet to be reported”.
Nikos Roussanoglou, Hellenic Shipping News Worldwide