For a long time, ship recycling conditions in South East Asia have been a target among NGOs. This can change, through the ratification of the Hong Kong Convention for the Safe and Environmentally Sound Recycling of Ships. As such, last week’s news that Bangladesh has approved the ratification of HKC is seen as a major breakthrough for the industry.
In its latest weekly report, shipbroker Clarkson Platou Hellas said that “this such a huge step towards the entry into force of an international recycling convention for shipping and is the second destination, after India, in the Indian sub. Continent to ratify the HKC. The approval from the government now requires the signature of the foreign minister after which, the Shipping Ministry will send ratification to the International Maritime Organization. All that is required now is for a major flag state to approve for the convention to be mandated. The Bangladesh government approval means that the required recycling capacity to bring the HKC into force has now been reached. The HKC only needs one more major flag state to accede for the convention to be assigned.
Reports suggest that one such flag state is poised to ratify the convention in the next few weeks. This will be a truly groundbreaking moment for the shipping industry. India has seen some slight improvements in rates this week which in encouraging as we head in the typically quiet period with the monsoon and holiday season now upon us. However, many recyclers are questioning the turnover of tonnage being offered for recycling and subsequently, concerned for their domestic industry. However, patience is the key. Whilst the local recyclers and steel traders are not optimistic for the next 2-3 months, the general feeling globally is that towards the end of this year and into the next few years, a large volume of tonnage will head towards the ship recycling facilities, hence many yards seem happy to sit and wait till the supply of units escalate and subsequently, most likely, be in a position to purchase at lower rates”, the shipbroker concluded.
Meanwhile, in a separate report this week, GMS (www.gmsinc.net), the world’s leading cash buyer of ships said that “the big news revolved around the momentous and much anticipated ratification of the Hong Kong Convention in Bangladesh that has finally come to pass. Two weeks ago, after high-level local meetings, all that remains now is for the Marshall Island or Liberian Flags to complete the approval process so that the HKC can enter into force. Bangladesh levels and L/C approvals have continued to struggle post-budget, and it seems that for the time being, there will be some stricter requirements imposed from the Central Bank for Chattogram Recyclers to secure tonnage. Hence, a lower overall appetite has emanated from this market this week, while much of the demand appears to be satiated for the moment and the markets seem to be taking a breather, especially as the monsoons start settling in. India is not yet on par with Bangladesh and lacks some of the aggression and demand from local Buyers to acquire, whilst Pakistan is totally out of the buying for reasons that have been well documented for weeks now. Lastly, Turkey seems to be heading Pakistan’s way as their levels are closest to each other from all the major markets and both markets continue to struggle to secure tonnage due to currency, and scarcity issues.
Indian fundamentals remained firm this week as the Rupee appreciated against the U.S. Dollar and amidst continued demand for raw materials, steel plate prices firm. We are not at the peaks seen last year when the USD 700/LDT mark was breached. Notwithstanding, at these historically firm levels into the USD 500s/LDT and even close to USD 600/LDT, we are still 30% above the decade’s average. Finally, there is still an ageing fleet that needs to be scrapped, but many owners are not yet biting the bullet and choosing to sell while they still have time before surveys and can make charter income today. However, BIMCO has recently estimated that double the amount of tonnage will be recycled over the next 10 years due to incoming regulations and the order book, compared with the previous 10 years”, GMS concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide