Ship Recycling Market Looking For Solid Footing

The ship recycling market is still looking for a solid trend, as it remains in flux. In its latest weekly report, shipbroker Clarkson Platou Hellas said that “at present, there seems to be too many obstacles to give any comfort to ship recyclers and help in their analysis of positive sentiment. The seasonal monsoon season that is still causing havoc in the Sub. Continent, continued financial restrictions affecting the domestic Letter of Credit payment structures, weakening steel markets, and now visibly more tonnage being circulated, particularly from the Far Eastern Owners, are all creating a messy conundrum for ship recyclers without few offers being tabled for the available tonnage. This in turn is ensuring some of the cash buyers to question how much lower rates will fall. For example, 10 days ago, a small container vessel was attracting region USD 625/ldt, five days later the sale failed, and a resale was down to region USD 600/ldt, this week we have seen a similar unit being concluded for region USD 564/ldt basis delivery to India.

According to the shipbroker, “reports suggest that in fact, cash buyers are now reselling some of their dry bulk inventories for lower than the USD 500/ldt level, a key marker. Bangladesh is practically on hold for now with the L/C restrictions biting hard and causing local recyclers to refrain from offering which, in turn, is creating problems for those cash buyers with tonnage in hand unable to resell to Bangladesh and having to divert tonnage to their counterparts in India and even Pakistan. The latter, Pakistan, has shown some signs of rejuvenating, as financing becomes, slowly, more available, however the signs are that only the smaller units will be workable for the time being. One further piece of news to emanate from Bangladesh this week is that the ‘Bangladesh Ship Breakers and Recyclers Association’ circulated an announcement that a Committee had reached an agreement that as from 31st August, 2023, the Seller of any vessel arriving for recycling in Bangladesh must provide an IHM (Inventory of Hazardous Materials) as their part of responsibility, this provision of which, to be incorporated in the Memorandum of Agreement and a copy of the IHM must be submitted along with the Notice of Readiness. What impact this will have on the Owners thinking towards Bangladesh remains to be seen”, Clarkson Platou Hellas concluded.

Meanwhile, in a separate report GMS, the world’s leading cash buyer of ships, said this week that “the lethargy in sub continent recycling markets continues for another week as owners and cash buyers comtinue to offload tonnage at spiralling prices, chasing down rates seemingly by the day. Indeed we have seen prices decline from over USD 600/LT LDT earlier this year, to seeing several standard (albeit poor condition) dry bulk sales below USD 500/LDT recently. So a fall of over USD 100/LDT has been realized in recycling markets since the start of the summer and the age old problems persist of strained LCs and lack of financing, meaning there appear to be more vessels than capable end buyers at present – certainly in the more challenging markets of Pakistan and Bangladesh.

India remains a constant market, in terms of end buyers capable of opening LCs, yet prices are once again positioned at the bottom of the pile in the sub continent, with most end users fearful of committing on fresh tonnage such has been the extent and ferocity of recent price falls. The supply of tonnage – particularly from Far East and China markets – has remained a constant over these summer months (when it is usually quieter), and those cash buyers who have bougbht ‘as is’ tonnage without back to back end users in place have been hardest hit with tumbling levels and a stockpile of seemingly unsellable tonnage. There is hope however that once monsoon season ends and product starts to shift from yards and mills reopen, that we may see a greater demand at least to acquire once again”, GMS concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide