Ship Recycling Needs to Pick Up for Shipping to Lower Emissions

Perhaps a part of the shipping market which is often overlooked, ship recycling could play a critical role in the industry’s decarbonization process. So far though, it’s been far from that, with many older ships remaining in service, due to the major uncertainties, regarding the fuels which will secure compliance with the new regulations.

In its latest weekly report, shipbroker Clarkson Platou Hellas said that “2023 was a gloomy year for the ship recycling yards in the Indian sub. Continent as low demand for scrap steel domestically and financial restrictions (Bangladesh and Pakistan) ensured the market was volatile and uncertain throughout the year, especially in the second half of 2023. Strong rates in the tanker sector guaranteed a slim supply of such units arrived at the waterfront, whilst owners of the larger bulk carriers were also reluctant to sell as rates fluctuated, but in a positive manner for the owners. The well documented situation caused by the Houthi rebels in the Yemen/Red Sea area has probably put an end to owners thinking about selling their aging container units for recycling for a several months too, therefore, we are expecting the first half of 2024 to continue to see limited activity, a similar pattern to those of the last six months of 2023.

Turkey appears to be the market of the moment with several vessels having been sold, or circulated, for EU recycling. There is strong demand for the steel at this current time with price levels now pushing into the high 300’s towards the USD 400/ldt levels. These could be busy times for the Turkish recyclers. Moving Eastwards, there is a real lack of demand for steel from the domestic mills in India which is creating negative feedback for any potential tonnage for sale. As can be evidenced from the sale reported below, a strong price can be achieved for a suitable candidate but must hasten to add that, the container sale contains a large quantity of bunkers included in the sale. Bangladesh and Pakistan continue to be overcome with their financial restrictions which looks set to continue for some time. Whether the elections in Bangladesh, scheduled this coming weekend, will aide any assistance will remain to be seen, although many in the industry doubt this very much”.

In a separate weekly report, Best Oasis (www.best-oasis.com), one of the world’s leading cash buyer of ships added that “inconsistent setting characterized the ship recycling activities for this week in the new year. There was no significant demand in India, where the market remained unchanged and is anticipated to progressively decline. Dollars have been in limited supply in Bangladesh for a considerable period, creating the present deadlock situation, and this ailment is anticipated to last for a substantial duration. The approaching elections in Pakistan, coupled with the possibility of currency depreciation as a result, are stimulating a revival in purchasing interest. Turkey is now undergoing a period of reduced activity, which is comparable to the previous week. The challenges faced by ship recyclers in acquiring tonnage in 2023 are becoming more severe due to the escalating Red Sea crisis, which is driving up demand for vessels and freight rates. The increase in freight rates, due to the crisis in the Red Sea, is anticipated to encourage owners to hold onto their older ships instead of selling them for recycling. The UN World Economic Situation and Prospects 2024 report indicates a projected deceleration in global economic growth, with an estimated decline from 2.7 percent in 2023 to 2.4 percent in 2024. The current state of global affairs poses significant risks to global growth. Factors such as weakening global trade, high borrowing costs, elevated public debt, persistently low investment, and mounting geopolitical tensions all contribute to this uncertain outlook. The projected growth in several developed economies, including the United States, is expected to slow down in 2024 due to factors such as high-interest rates, a decrease in consumer spending, and a weaker labor market”, Best Oasis concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide