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Ship Recycling On A Steadily Declining Path, Spells Bad News For Ship Owners

It’s no secret that 2019 hasn’t proven to be the landmark year that many had hoped, with regards to the ship recycling activity. With freight rates reeling under the trade wars’ pressure and an increase in tonnage supply, it was regarded that a repeat of the 2018 year, from a recycling point of view, would be enough to “steady the boat”. However, this hasn’t proven to be the case.

In its latest weekly report, Clarkson Platou Hellas said that “with the longest day now upon us, many feels like it has been the longest week with everyone awaiting the consequences of last week’s Bangladesh budget. This has ensured that many buyers remain skeptical when taking positions on any unit as there still requires some clarity on where price levels are positioned following the announcement last week. This has resulted in the market being blurred with a large spread on price indications, but many feel the true reflection of the budget will be completely known next week. However, with only a trickle of tonnage entering the market, albeit, mainly larger LDT units, buyers are not overly swamped with tonnage which may lead to some speculative levels being tabled. There has also been positive news from other fundamentals of the market such as the Iron Ore price which has surged since the beginning of the year and is trading at levels not seen since 2008 at $105. Therefore, it is hoped this will further stabilize the market over the summer months and provide interesting rates for any Sellers looking to work their units through what is usually, a tiresome period”.

In a separate note, Allied Shipbroking added that “the ship recycling market has been held in bear territory for yet another week. A sluggish mood is likely to hold now, with most demo buyers holding a relatively conservative approach towards further investing for the time being. Bangladesh is remaining relative quite, especially after the budget announcement, with most being rather hesitant to offer any higher levels. Moreover, quoted numbers in India are now on a downward correction trend, whilst uncertainty towards the market still prevails. On the contrary, Pakistan has shown some sort of resistance against the negative pressure which has prevailed across the rest of the Indian Sub-Continent market of late. Yet despite all of this, the flow of candidates being concluded for scrap was at relative good levels these past few days, with some good numbers being given for higher spec units. With all being said, we can expect a rather quiet summer to take hold in the market, with few sparks being seen in-between (in terms of volume at least)”.

Meanwhile, GMS, the world’s leading cash buyer said that “the ongoing decline in the Indian sub-continent markets have yet to show signs of abating / easing this week, with ever-lower numbers surfacing from the various ship recycling locations – if any were forthcoming at all. Case-in-point, ever since the announcement of their budget on June 13th, Bangladeshi end Buyers have remained virtually silent as there is still uncertainty surrounding the imposition of the 10% VAT – something that could potentially lead to a USD 25/LDT decline in prices. As a result, canny end Buyers have started to offer levels below the USD 400/LDT mark to test the waters. However, few Owners or Cash Buyers are willing to ‘bite’ at these levels, optimistic that the powerful BSBA lobby in Bangladesh can overturn the additional taxes / duties, just as they have previously done. The PSBA in Pakistan has likewise been challenging the Government regarding increased duties that were announced during their recent budget. If successful, we may certainly see Gadani Recyclers return to the game after nearly a year on the sidelines. For now however, the focus remains squarely on India where prices remain the highest. Yet, confidence has been severely shaken in Alang by drastic steel declines of over USD 20/LDT over recent weeks and many end Buyers would rather wait and watch market developments before committing themselves on new tonnage. Finally, little has changed in Turkey over the last several weeks. The Lira has improved marginally during the week whilst plate prices languish at region USD 290/MT. Overall, it has certainly helped that fewer prospective candidates are currently available in the market during the traditionally quieter monsoon / summer season. Towage jobs for undertow and offshore units are generally not approved by marine warranty surveyors over the monsoon period and news of one jack up rig having sunk off Myanmar is already circulating this week, due to one Cash Buyer reportedly taking unnecessary risks”, GMS concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide

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