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Ships’ Recycling Market Need Careful Navigation as Prices Fluctuate

The demolition market underwent a major price correction during the past few days. In its latest weekly report, shipbroker Clarkson Platou Hellas said that “following the accelerated prices witnessed over the festive season, and into 2021, which was driven by fresh optimism and firm global steel markets, we have had an unforeseen correction which caught all Buyers and stakeholders off guard, with a reported $30-40 ldt drop this week. This came late last Friday when the market became awash with tonnage, mainly from Cash Buyers releasing their own inventories, as well as some Far Eastern tonnage being proposed just before the oncoming Chinese New Year.

According to the shipbroker, “this resulted in many buyers returning to a watch and wait mode, and cash buyers having to withdraw or reduce previous indication on the table, with the sudden drop causing a more cautious approach from them. As a result, little activity this week has been seen because of this altered sentiment. Many Owners may have been alarmed by this but experienced players in the industry know all too well that these sudden corrections can occur and Sellers must be reminded that the numbers still on offer are historically firm and possibly still provide a commercial option for them. The price reduction indicated can be seen by the sale reported hereinbelow, and therefore it will be interesting to see how the recycling markets open after this weekend and whether any reload in sentiment can be witnessed.

Source: Clarkson PLC

Despite the rapid introduction of Covid vaccinations globally, all indications are that it will take some time until most of the Global population is inoculated and until then, we can only expect continued disruption to the wider shipping industry as ports place further restrictions on crew changes and affect the ability to conclude business at a steady pace. This will be an evolving situation as the year progresses and will need both parties in any transaction to be patient and remind themselves of the difficulties that they are facing due to the pandemic”, Clarkson Platou Hellas concluded.

In a separate report this week, GMS , the world’s leading cash buyer of ships, said that “sub-continent markets have continued their depressing downward cycle this week, with virtually no fresh enquiries on currently available tonnage and previously concluded high-priced deals now starting to face problems, with several deals unfortunately failing from both Cash Buyers and End Buyers alike. In Bangladesh, prices appear to have come off by at least USD 50/LDT from the brief spike seen earlier this year and as a result, most owners have decided to temporize their sales and continue trading their respective units, especially as freight markets remain relatively firm. Although a couple of lower priced seemingly distressed sales were concluded this week, the expectation is that as steel plate prices retain some sense of stability, vessel prices may eventually creep back up again, particularly as the supply of tonnage remains subdued (as it has been over the past few weeks).

Source: GMS

Indeed, despite steel prices falling by about USD 30 – USD 40/LDT across Pakistan, Bangladesh and India, the extent of the correction seems overly dramatic and is perhaps in response to a perceived overheating of the market in recent weeks. As we therefore approach the inevitably quieter Chinese New Year period, it would not be surprising to see an uptick in levels again, especially as demand remains relatively steady across all locations and despite several End Buyers in Bangladesh recently filling their plots. On the far end, the Turkish market appears to be tumbling in its own right, with steel levels (both domestic and import steel) recording further declines this week and levels for ships rolling back another USD 5/MT (with further falls anticipated). As such, it has certainly been a rollercoaster start to the year, with a steep increase in levels, followed by a dramatic and sharp fall. Certainly, some form of middle ground needs to be reached whilst fundamentals start to stabilize / improve once again”, GMS concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide

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