Container Tonnage Could Enter the Ship Recycling Market

The ship recycling market is in a state of flux, as more offers are being presented to ship owners compared to the previous weeks. However, many yards are still absent from the market, in anticipation of more tonnage, most notably container ships, being available for demolition. In its latest weekly report, shipbroker Clarkson Platou Hellas said that “despite slight falls this week with the local steel markets in India, offers from buyers for any available tonnage has seen an increase this week, most likely as recyclers look to fill their yards with any available tonnage. The sparce tonnage currently being experienced is certainly aiding these improvements as the domestic recyclers become frustrated, having to look out over their empty yards. There have been reports that some of the recyclers remain happy to sit on the sidelines, believing the speculation of a large volume of container tonnage ready to hit their destination, however, whilst yes, we will see these volumes increase, analysts suggest there is still much time, even next year, until the change in pattern is witnessed and container operators offload their aging tonnage in abundance”, the shipbroker said.

“At a general meeting arranged by the Ship Recycling Industries Association of India (SRIA) recently, a new resolution was collectively approved which stated that ship recyclers must not accept any new MOA terms by which “huge amount of money can be claimed by sellers against the recycler for any accidents/defamation and other situations including loss of reputation during operational procedure.”. And following this, the ‘SRIA’ will forward, at some time, their own standard contract terms on which they require their members to use. How this will operate remains to be seen but it does appear the domestic recyclers are looking for a situation to minimise their own risks. Meantime, looking to their counterparts, Bangladesh remains quiet with no real purchasing interest at this current time, and Pakistan, who have shown renewed activity over recent weeks, may slow down their purchasing campaign as the majority of recyclers who had Letter of Credit facilities appear to have tonnage in hand and will have to wait before bidding further as the availability of U.S. Dollars in the country remains limited”, Clarkson Platou Hellas concluded.

In a separate note, GMS, the world’s leading cash buyer of ships, said that “bullish buyers in both, the Indian and Pakistani markets, continue to push on for another week as they manage to secure some of the recently recorded, high-priced sales from both – the dry bulk and container sectors. Some of the recent container sales (in particular) have caught the eyes of many in the industry, especially as levels gradually edge back up into the high USD 500s/LDT (approaching USD 600/LDT), thereby providing prospective Owners of vintage units, food for thought about the potential future of their aging beauties. India certainly has been the chief driver behind much of the recent activity, as domestic steel plate prices once again posted decent gains of about USD 13/LDT towards the end of the week. Moreover, following the conclusion of a successful G20 summit – in addition to a reported firming of international steel rates to the tune of about 2% – the overall business outlook across the country remains good – at least for the domestic Ship Recycling sector.

Pakistan is also not too far behind, with decent levels being displayed on available dry bulk units and even as L/C approvals once again start to gain some traction, especially after almost a year of being on the sidelines. Bangladesh remains completely out of the buying, with levels down and L/C & bank approvals once again hard to come by. A decent number of well-priced Chinese-owned vessels have also been delivered and beached over the summer / monsoon months, but there seems little chance of any further deals being done below USD 500/LDT, as competing markets inch on higher. Finally, Turkey seems to have entered into an over-extended holiday with virtually no activity being reported, and other than negative fundamentals (Lira and steel plate prices), the market has had virtually no movements being recorded for months on end. Overall, the supply of tonnage remains decent going into sub-continent markets during Q4 of the year, with predominantly aging handy / Panamax sized dry bulk units & Feeder containers heading to the various recycling locations, in what will hopefully be a busy end to the year”, GMS concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide