Ship Recycling Market Expected to Quiet Down As Ramadan Started

The ship recycling market has seen quite a lot of activity of late. However, it’s bound to quiet down, as a result of the Ramadan period. In its latest weekly report, shipbroker Clarkson Platou Hellas said that “as we entered Ramadan this week, there was a subdued feeling across the sub-continent as end recyclers started to observe the holy month and retreat home. This has been a familiar theme of a quiet market across sectors in all regions for most of the year with a distinct lack of tonnage continuing to starve the ship recyclers. However there was an impressive price received for the below reported Capesize, which has been a rarity this year with the firm freight markets on offer. This price follows an announcement from the Central Bank in Pakistan that imposed a 100% cash margin on the importation on 177 items including Steel products. By not including Ships in this new banking margin, prices are expected to increase further in Pakistan with this being one of the sole ways to import Steel into the country with no cash restrictions. The Government seems to have taken this step to discourage imports and support the balance of payments due to the struggling Pakistani rupee (PKR) which had depreciated to an all-time low of 185.4 against the dollar this week”, Clarkson Platou Hellas concluded”.

Similarly, Allied Shipbroking said this week that “the ship recycling market followed on a positive course for yet another consecutive week, with Indian and Pakistani breakers having come out strong and heavily competing in terms of offered price levels. The common denominator that favored this upward trend in scrap prices remains the increased price of local steel in both recycling destinations. Pakistani breakers -in addition to the favorable price of local steel-, were also driven by a need to cover the existing shortage of inventory they had accumulated of late. The notable point in this week was the firm prices achieved by high ldt candidates that came to market, with prices reaching just above 700/ldt. However in terms of the volume of the transactions, we can still see evident in the market the lack in demo candidates available right now.

Bangladesh continues to lag behind its two other main competitors, with local steel mills seemingly reluctant to take on these high prices for the time being, leaving local breakers at a disadvantage against their Indian and Pakistani counterparts. Given the positive trends that have been noted of late in steel plate prices, we may well expect things to remain firm in the near-term. However, even at these historically high prices on offer by breakers we are unlikely to see any significant shift in the amount of tonnage coming to market by owners at this point”.

Meanwhile, in a separate report, GMS , the world’s leading cash buyer of ships said that “it has been another impressive week in both the Indian and Pakistani markets, with reportedly several sales taking place above the USD 700/LDT mark. These levels seem increasingly indicative of a market that is firm and these repeat record levels should hold for the time-being (especially after the recent volatility). Capacity also remains ripe across the sub-continent markets and demand is certainly firm in both India and Pakistan, as levels push on off the back of steel plate prices that remain positioned impressively high (even after this week). The Bangladeshi market is the only sub-continent destination that remains mute, despite steel prices there having flatlined (at impressive high’s) through much of this week. Yet, Chattogram Recyclers are refusing to buy at these high levels, even though evidence suggest these numbers are here to stay for at least the next month (or so)!

Much of the high-priced inventory concluded during the first quarter has ended up going to Bangladeshi shores, including a healthy collection of the large LDT VLCCs, VLOCs, Capes and Aframax tankers. As such, many Bangladeshi Buyers have already filled their plots with tonnage and are likely enjoying something of a Ramadan breather (especially with domestic activity having tempered of late). Meanwhile, Pakistan has been beset by some major political upheaval of late, with Prime Minister Imran Khan being ousted from office (after a vote of no confidence) and his replacement is yet to be fully decided. Moreover, even the Pakistani Rupee has faced some volatility this week, raising eyebrows and caution. It is therefore unsurprising that the focus of Gadani recyclers has been elsewhere, despite two high-priced headline sales this week (that are seemingly set for a Pakistan redelivery). In the absence of a hot Bangladeshi market, India has been securing much of the market tonnage over the last few weeks – not only HKC and specialist tonnage, but also some larger LDT tanker and offshore vessels finding their way to Alang. Finally, the Turkish market, whilst still stable at historical highs, remains drudged with not much to report in terms of sale and purchase activity”, GMS concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide