Ship Recycling Market Going Through Some Changes as Competition Intensifies

Ship owners could find themselves in an advantageous position, should they wish to exploit the current market dynamics in the ships’ recycling segment. In its latest weekly report, shipbroker Clarkson Platou Hellas said that “the inevitable was always going to happen and last Saturday saw the collapse of the infamous Bangladeshi Cartel, the surprise however, was that it lasted for around two months which was longer than anticipated. It was first initiated by the local ship recycling association because they felt prices were increasing too quickly and acted before they spiralled out of control. Several very high-priced sales were negotiated in the market by some Cash Buyers without, what local recyclers felt, was any real substance. However, during this ‘controlled’ period, the local recyclers became frustrated at the sight of their counterparts in Pakistan and India becoming more dominant and acquiring any available unit that came on the scene. Eventually, and as seen this week, their frustration has ensured the cartel was finally dispensed of so that the local recyclers can once again come to the bidding table in a more aggressive manner and attempt to compete with Pakistan and India once again.

According to the shipbroker, “there is no surprise in this position taken as the severe lack of tonnage in the market at present is , making each new candidate more competitive than normal and the Bangladeshi breakers are once again keen to purchase tonnage for their recycling yards, and not lose out to their rivals in the Indian Sub. Continent. We have now seen price levels steadily improving, due to the end of the Cartel and in addition, local steel markets increasing, and the optimism is that price levels for ship recycling should continue to gain momentum northwards. But as we always say, the ‘early bird catches the worm’ and therefore those owners willing to adopt a realistic approach by selling at best on today’s market will reap the rewards and those owners that have greater expectations than is currently on view may miss the market. We are back to ‘pre-Covid’ rates which is a welcome boost to the shipping industry – now we wait to see if any ship Owners are ready to succumb to the current levels. There was further good news over the last week, where the EU commission finally granted two more recycling facilities ‘full E.U. approval’ in Turkey, with many feeling that this has been long overdue. It is worth noting that there was a press release two weeks ago from the ‘Commission’, but it was not until last week that they were officially added to the EU white list. We congratulate these two yards (Asvar Ship Recycling and Simsekler Ship Recycling) for their hard work in obtaining this approval and the resources required. This is extremely important as the capacity in Turkey has been close to over flowing in the last quarter of this year as Owners are severely limited with options if they have a vintage EU flagged unit, leaving the Turkish recyclers to pick and choose what Vessels they desired. We hope that the Commission do not stop here and continue to approve more facilities in 2021 as Turkey establishes itself as the number one spot for EU recycling”, Clarkson Platou Hellas concluded.

In a separate report this week, GMS , the world’s leading cash buyer of ships, said that “following a lackluster few quarters for the Bangladeshi market, demand has come surging back and prices in a cartel-less Chattogram shot up this week as local offers are no longer going through (or are restricted by) a committee of powerful local individuals, who had set up the cartel to begin with. As such, Bangladeshi End Buyers are now free to offer (as they wish) on an increasing supply of vessels, as the industry witnesses prices easily approach / sail past the USD 400/LDT mark threshold on select units. Moving forward, it is abundantly clear that both India and a resurgent Pakistan will have to revise their respective price ideas upwards as well, especially if they are to compete with, what could well be, a rampant Bangladesh during the last month of the year / early into 2021. Indian Buyers has certainly enjoyed several weeks of increasingly bullish sentiment & pricing and have kept themselves satisfied with a greater supply of HKC green vessels & specialist units of late, as Pakistan and Bangladesh compete on the larger LDT units on offer. Finally, the Turkish market has made some serious positive strides this week (as far as local steel plate prices are concerned) and even though the Lira has weakened a little, local offerings have made a noteworthy improvement. Meanwhile, Covid cases are on the rise across the subcontinent and indeed, around the globe, in what could prove to be the major challenge facing shipping markets and ‘as is’ deliveries in the coming weeks / month(s), as the industry approaches the end of the year. With demolition prices now starting to creep up towards second hand prices, expect to see far more recycling deals completed towards the end of this year and moving into 2021, unless chartering rates improve significantly to offset such deals.

Nikos Roussanoglou, Hellenic Shipping News Worldwide