“Tidal Wave” of Demolition Candidates Expected

A tidal wave of ships sold for scrap, is expected over the coming years, especially, as the green emission rules become more stringent. In its latest weekly report, shipbroker Clarkson Platou Hellas said that “the quiet market continued this week with both Bangladesh and Indian markets remaining stable. However, many of the industry players gathered at an intimate discussion panel in London, where many of the usual topics were intensely debated, but one topic which always stands out is whether the EU approved yards have the capacity for the eventual tidal wave of tonnage expected to hit the market once the new ‘Green’ emission rules become more stringent. The answer is sadly no and it is up to the EU to urgently start to plan ahead and provide solutions to Ship Owners, who will definitely face difficulties in the future as to where they can legally recycle their vessels. It is proving arduous to call market levels as one week there are reports of a dip in rates and then subsequently, price levels bounce back just as quickly, thus grasping the local sentiment proves difficult. As freight rates continue to keep tonnage away from the recycling industry, activity looks set to crawl through the summer months, especially with the monsoon season set to begin”.

Allied Shipbroking added in its own report that “over recent weeks the increasingly competitive prices offered by Bangladeshi yards have ensured that the lion’s share of tonnage have headed their way, with sales still able to hit the $600/ldt for the right vessel. Pakistan remains out of the picture, with its one recent arrival ‘Era’ actually sinking at anchorage offering yet another unwelcome blow to breakers.

We might expect a slightly busier few weeks in India and Bangladesh as yards seek vessels ahead of the monsoon season. In Bangladesh, the government recently rolled back its environmental classification of shipbreaking, which stands to greatly aid shipbreakers ability to quickly process vessels once they arrive offshore. The latest budget has just been announced and seems to offer few shocks to end-buyers, and forecasts that the budget deficit will remain relatively stable to June 2024 along with an indication that the Bangladesh Bank will reverse margin increases on letters of credit and perhaps could signal an improving situation with regard to the recent dollar squeeze it has been experiencing. Now that there is less uncertainty handing over buyers, we might see increasing confidence and prices should remain steady in the short term”, Allied said.

Meanwhile, in a separate note this week, GMS (www.gmsinc.net), the world’s leading cash buyer of ships said that “as the Bangladeshi budget of June 1st starts to be digested in full, it has been an altogether quieter week in Chattogram as local banks and Recyclers evaluate the outcome to ensure no unexpected surprises emerge, before committing afresh on tonnage – and thus far, none seem to be reported. As such, it should be a busier time for sales and activity from next week once business resumes, although we are now entering the traditionally quieter monsoon and summer months when much of the labor starts to return to their hometowns due to the persistent rains, rendering yards far too difficult for cutting/recycling activities. Meanwhile, India has also seen some positivity return as the Indian Rupee gained some good ground to fall below the Rs. 83 level against the U.S. Dollar, where it had been recently trading.

The supply of tonnage also remains surprisingly scarce, so any vessels that do come to market are perhaps seeing levels above the reality on the ground, as Cash Buyers look to secure first and work end Buyers’ thereafter, hoping to create some competition and obtain firmer levels. Pakistan remains completely out of the picture for yet another week, with political and economic uncertainty continuing to beset the country and little hope of ship recycling activity resuming any time soon. Furthermore, despite a busy few tides gone by in Bangladesh and end Buyers starting to get around their L/C hurdles with the Central State Government bank, plot capacity remains healthy in both Bangladesh and India, so there is certainly potential to absorb more incoming tonnage. Finally, Turkey sails through another week of opposing fundamentals, as President Erdogan cinches a narrow win and secure his position, with his primary aims reportedly being that of battling the rampant domestic inflation”, GMS concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide