“Wait-and-See” Approach Dominates Ships’ Demolition Activity
It’s been another week of lacklustre demolition activity, which doesn’t bode well for the future rebalancing of the shipping markets, despite the strides forward taken during 2018. Should world trade growth slowdown even further next year, it will take a renewed approach to demolitions by ship owners, in order to restore balance in the market.
In its latest weekly report, shipbroker Clarkson Platou Hellas said that “we have witnessed another week of fewer negotiations showing further evidence that Owners and Cash Buyers remain in a ‘watch and wait’ mood as sentiment locally has been hit with local, and global, steel price depreciation. With Bangladesh and Pakistan almost redundant in the market, India has also been subdued with the large volume of tonnage being held in certain cash buyers hands struggling to attract logical numbers for their resale value. With this in mind, several of those cash buyers appear to be holding onto the tonnage hoping that markets will rise in the forthcoming weeks. However, this could possibly be a risky move with the outlook from many being that no positive correction is around the corner. Fortunately where the Indian market is concerned, despite reduced steel prices, the currency has recovered against the U.S. Dollar by about 8% which balances out the situation. Regarding global affairs, a crucial time could be upon us in relation to the G20 summit and importantly for the steel industry, where the respective leaders from USA and China had a meeting on Argentina”.
In a separate note, Allied Shipbroking added that “limited reported activity in the ship recycling market during this past week, despite owners being partly deterred by the overall improvement noted in earnings across most sectors and size segments of late. In the dry bulk sector, there were only two reported deals that came to light. One being for a 30-year-old Handysize and the other for a 17-year-old Capesize. In the tanker side, a couple of Japanesebuild Aframaxes were sent to beached for relatively competitive levels of $425/ldt on “ as is, where is” basis in Singapore. At the same time, a S. Korean containership, a large OBO carrier and several offshore vessels were also picked up by cash buyers. Deteriorating market fundamentals in Bangladesh has not yet benefited other scrapping destinations in the Indian Sub-Continent. Domestic steel plate prices in India and Pakistan have seen some declines during the past week, diminishing cash buyers’ interest somewhat”, Allied said.
Meanwhile, GMS, the world’s leading cash buyer mentioned in its report that “it was another troubling week in the Indian subcontinent ship recycling markets as fundamentals (either local steel plate prices or currencies or both) tumbled in the various markets, leaving Cash Buyers, who previously purchased units at the peak of the market, unable to offload their inventory and this struggle will only get worse as new lower realities in the subcontinent markets are increasingly evident by the day. The Pakistani market suffered the most tragic of weeks as the PKR endured another shocking depreciation (to the tune of about 6%) along with local steel plate prices that fell nearly USD 40/Ton, leaving Gadani completely out of the reckoning on any available tonnage. While Bangladesh has managed to absorb much of the tonnage over the previous month or so (with India and Pakistan still inert), levels in Chittagong are also starting to cool off, with a USD 15 – USD 20/Ton decline witnessed over the recent weeks. The major problem in Bangladesh has been an overall shortage of U.S. Dollars in the country, leading to an excruciating shortage of available Buyers who are able to get the necessary bank limits in order to open new L/Cs. Capable Buyers have already booked themselves with tonnage and are content to wait-and-watch the ongoing developments before offering (invariably lower) numbers. The upcoming local elections due on December 30th have also given sufficient reason for Chittagong Recyclers to take a breather from the buying and evaluate market movements thereafter. India has also endured a turbulent time on the currency and even though the Rupee has firmed considerably over the last few weeks, the volatility of local steel plate prices has been the bane of Alang Buyers. As such, an ongoing lack of local offerings stands testament to a weakening market and declining local sentiments. With steel plate prices losing ground in all markets (except Turkey), prices are expected to remain muted until the end of the year”, GMS concluded.