Ship Recycling: “No Tonnage, No Demand, No Party”

A lack of vintage tonnage has kept on plaguing the ship recycling industry. In its latest weekly report, Best Oasis (www.best-oasis.com), a leading cash buyer of ships, said that “the ship recycling industry continues to struggle across all four major destinations. In India, the market remains stagnant with no available tonnage and little hope for improvement until after the monsoon, as the new budget has failed to generate momentum. Bangladesh sees minimal interest from recyclers due to the monsoon, international steel prices, and low demand for ship scrap, though a few recyclers are still showing interest despite political challenges. Pakistan’s market conditions remain poor with few active buyers and minimal activity. In Turkiye, the market is virtually inactive, showing no signs of progress or activity for an extended period”.

According to Best Oasis, “the global shipping industry is facing disruptions similar to those seen during the COVID-19 pandemic, significantly impacting various sectors. A severe container shortage is worsening supply chain issues. With rising freight rates, shipowners are more inclined to keep their vessels in operation rather than sending them for demolition, resulting in fewer ships available for scrapping and contributing to the sluggish conditions in ship recycling destinations. China’s steel exports are projected to hit a record high in 2024 due to overproduction and declining domestic demand. Analysts foresee reduced steel consumption in China for the coming years, which will impact global steel prices and consumption”.

In a separate report this week, shipbroker Intermodal said that “the ship recycling sector remained under pressure this week, with high freight rates and geopolitical issues limiting the availability of vessels for scrapping. In India, the steel market sent mixed signals, with slight price corrections seen in local steel plate and scrap materials. Despite these adjustments, demand remains weak, further affected by the ongoing monsoon season, which continues to dampen market activity. In Alang, ship recyclers remain cautiously optimistic and are offering slightly better prices for the limited tonnage available, although significant improvements are not expected until economic conditions improve. Bangladesh faced significant challenges as political unrest due to protests against government policies affected the recycling industry. Demand in the local steel market remained sluggish, leading to price reductions for ship scrap and complicating business operations. In addition, efforts to enforce compliance with green recycling practices have delayed the import of end-of-life vessels, keeping the market under pressure. In Pakistan, the market remained stable but quiet, with little change in steel prices. The recent interest rate cut by the central bank and an IMF loan agreement have brought some economic stability, but these developments have not yet stimulated market activity. The monsoon season and new import taxes have also slowed construction activity, affecting steel demand. Turkey has seen minimal market activity, with stable steel prices but weak scrap demand. While inflation is showing signs of stabilising, the continued weakness of the local currency against the US dollar remains a challenge. The market remains largely inactive and no major changes are expected in the near future”, said the shipbroker.

It concluded its analysis by noting that “overall, the outlook for the ship recycling market remains cautious. The supply of new vessels for recycling is expected to remain limited in the near term due to ongoing geopolitical and economic uncertainties. Stakeholders are closely monitoring political developments, particularly in India and Bangladesh, which could potentially affect market dynamics”.
Nikos Roussanoglou, Hellenic Shipping News Worldwide