Ship Recycling Market Has Hit a Roadblock
In a separate note, shipbroker Allied Shipbroking said that “the ship-recycling market did not witness much change this week with activity appearing quite sluggish. Pressure has been mounting on breakers, with support for high demo prices having been flushed out by recent shifts in fundamentals in the Indian Sub-Continent, while at the same time these current price levels seem too soft to really attract ample tonnage to be retired. Amongst the different ship recycling destinations in the Indian Sub-Continent, India continues to show the most potential and appetite for business at this point.
Though even here we witnessed a drop this week in the prices that were being offered. In Pakistan, the recent political and economic instability have taken away some of the markets momentum in recent weeks, while the slump in local steel prices have left little support for any firm competition to emerge right now. Bangladesh on the other hand, has consistently lagged behind its other two main competitors for a fair while now, though things may be on the verge of a shift, as the shortage of vessels being beached starts to push end buyers to compete more aggressively in the market. Turkey’s market also appeared extremely pessimistic, recording significant depreciation in its currency and a further drop in domestic steel plate prices”.
Meanwhile, GMS , the world’s leading cash buyer of ships said that “another woeful week of declining sentiments has left all of the major global ship-recycling markets on edge as the industry approaches the summer / monsoon months in the sub-continent. Moreover, it seems doubtful (at present) that any more noteworthy deals will likely be concluded, especially with the industry in such a state of disarray. Depreciating currencies and maddeningly plummeting steel plate prices (especially in Pakistan this week alone) have left nearly all of the major recycling markets looking at a near USD 100/LDT decline in prices since the peaks of over USD 700/LDT (and nearly USD 500/MT in Turkey) seen several weeks ago. As a result, it is unlikely that Cash Buyers with inventory to sell or Ship Owners looking at fresh deals should be willing to take this hit, and may prefer to trade their vessels a little further, especially with freight markets now starting to improve.
A lack of supply may see sub-continent recyclers return to the table, and it has been a quieter overall last few months in terms of new candidates, as an improving freight sector and ongoing holidays (including the Holy month of Ramadan) have started to tell. Notwithstanding, at this stage it is impossible to tell where the bottom of the market may be, as once prices start to cool-off at key recycling locations, they tend to drop like a stone and Owners would be strongly advised against chasing down a market that appears to be hitting new lows with each passing day. It would be better to monitor market movements instead and wait for some stability / positivity to return before dipping back in at these new levels, wherever they may end – bearing in mind this is a sector that has almost tripled over the previous few years and some form of error correction was always in the books because what goes up eventually comes back down!”, GMS concluded
Nikos Roussanoglou, Hellenic Shipping News Worldwide