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Slowdown in demolition activity expected to be temporary

The expectation among shipbrokers is that demolition activity for older carriers will resume as soon as the market returns to its normal activity. In its latest weekly report, Clarkson Platou Hellas said that “with the Easter holidays in full flow across Europe, there has been an expected slowdown in new tonnage, and subsequent activity, which has given cash buyers some breathing space in what has been a frantic first quarter of the year. One of the major issues now affecting the market, however, is the financial restraints from banks in India and Bangladesh that are being placed upon the recycling industry, which is making it difficult for end recyclers and cash buyers to gain financial backing and restricting the opening of Letters of Credit.

This is particularly a problem due to the monetary value of the incredible amount of large tanker tonnage sold since the turn of the year which places more emphasis and risk for buyers and financial entities. This has therefore resulted in a thin layer of Buyers now actually capable of buying such units which further saturates the market and is why we have seen a region USD 20/ldt negative correction in larger tanker units over the past 2 weeks. This also comes at a time when there seems to be no demand for finished products in India, where in truth there has been little demand all year. This has also started to creep into Bangladesh where the steel markets locally have significantly dropped and resulted in the local sentiment to be drained further”.

Meanwhile, Allied Shipbroking added that “the market seems to have taken a step back this week, with the excessive speculative buying that was taking place a couple of weeks back having seemingly backfired for some cash buyers. There are rumors now that many in the market have a considerable backlog of purchase still in their hands and as such have stepped back from excessively competing on any new demo candidates that do emerge in the market. At the same time we are still seeing a fair amount of volume reported each week, with the tanker sector still remaining the main source for most, especially in the larger sizes. The prospects of a re-opening of Pakistan still hangs over the market, tempting most to stockpile now before Pakistan end buyers move to push up prices. This however has been something that has been discussed for some time now and it looks as though the consecutive delays in terms of a final decision being struck by authorities has now started to harm the market and put many cash buyers at risk. At the same time the recent geopolitical events that have unfolded with regards to trade tariffs may well start to trickle through to the demo market, leaving for weaker fundamentals as a repercussion of the lower steel product prices that may well follow”.

In a separate note, GMS, the world’s leading cash buyer said that “with the Pakistani ban on tankers lingering frustratingly on for yet another week, a Bangladeshi market that is seemingly in freefall at present and an Indian market that has struggled to keep up (competitively) with its neighbors, there seems to be little respite for the subcontinent recycling markets after a frustrating start to April. According to various Gadani industry sources, the ongoing ban on tankers is expected to be lifted any day now. Yet, that somehow seems increasingly unlikely (and unbelievable) as this has been the case since February (at least) and there always seems to be another hold up or delay in obtaining the relevant permission(s). Bangladeshi prices have plummeted recently following a crash in local steel plate prices and following the arrival of a massive number of vessels at Chittagong’s waterfront, demand started to drastically subside this week.

In comparison, India has remained in a far more tempered state by not getting carried away when local steel plate prices rose and not collapsing at the first sign of trouble. Meanwhile, the effectiveness of several deliveries (especially large LDT tankers) is now being called into question, bearing in mind the massive and speculative prices paid on a majority of these units and the fact that deliveries to various Cash and end Buyers have yet to take place. News is also forthcoming that end Buyers (especially in Bangladesh) are now trying to cause problems and delay opening LCs for the most questionable and frivolous of reasons”.
Nikos Roussanoglou, Hellenic Shipping News Worldwide

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