The ship recycling market has continued to show a lack of activity over the past week. In its latest weekly report, shipbroker Clarkson Platou Hellas said that “unlike the skies that will be lit above this weekend for the annual fireworks festivities, there remains a lack of spark in the recycling industry and despite the continued shortage of available tonnage, sentiment, surprisingly, has become weaker this week. Bangladesh have continuing issues internally with regards to their funding from local banks as the shortage of available U.S. Dollars bites further. Reports are emanating that even Letters of Credit for smaller financial outlay is becoming difficult and therefore only one or two buyers seemingly can influence local banks. With no ships arriving to the shores, there is talk of some steel mills in India closing due to the lack of supply of inventory from the domestic ship recycling yards. Reports this week also suggested that the steel markets in Pakistan fell by the equivalent of almost USD 40/ldt which will ensure activity at this destination will be kept to a minimum. Again, financing is becoming particularly difficult with political uncertainty internally. These really are trying times for the ship recyclers as the global insecurity is hitting them hard and we cannot predict any positive change soon unfortunately. The slow slog currently being experienced looks set to continue into 2023”, Clarkson Platou Hellas.
In a separate report, shipbroker Allied added that “the ship recycling market did not escape from the uninspiring trajectory that has taken hold of the market for some time now. Overall activity seems to be in clampdown, with the lack of direction prevailing across all main demo destinations. In the Indian Sub-Continent and Bangladesh specifically, the market lagged further behind as of the past week, with local Buyers seemingly willing only to offer at considerably lower levels at this point. Moreover, given the current momentum in local currency and steel plate prices, coupled with stringer availability in finance, we can hardly expect any considerable boost in activity for the upcoming period.
A great sense of disarray is also present in the Pakistani market, with End Buyers unable to step up at this point, that will may carry on the sluggish pace there as well. Finally, India may as well prevail as the market leader in the near term, being at the same time, the stable factor across the overall demolition market”.
Meanwhile, in its weekly report, GMS (www.gmsinc.net), the world’s leading cash buyer of ships, commented that “some unbelievably low and unrealistic offers have started to emerge from sub-continent markets this week, and as such, both Owners and Cash Buyers would be well advised to leave ship recycling destinations alone for the time-being, especially until some sort of floor is reached and stability regains a foothold. It has become increasingly difficult to obtain any firm or serious offers from any recycling market, as currencies continue to suffer across all recycling destinations and steel endures further volatile moves this week. Workable L/Cs are of chief concern in Bangladesh where End Buyers are struggling to obtain any sort of financing from local banks, amidst strict and ongoing governmental regulations on precious foreign currency reserves in the country.
On the rare occasion when an End Buyer is able to open a workable L/C in Bangladesh (mostly on smaller LDT tonnage), the numbers offered are so pitifully low, it’s nearly instantaneous to see tonnage withdrawn and re-directed towards competing markets. We have even seen Local Recyclers attempting to fix deals with Cash Buyers and Owners, subject to them obtaining approval from their financing banks within 3-4 days, which of course is never going to work and will see Bangladesh deprived of any meaningful tonnage until the end of the year – or at least until some sort of stability is seen. Finally, at the far end, after holding on and displaying some sort of stability (even though it’s in the dumps), things couldn’t get worse for Aliaga Buyers as steel prices took a small tumble this week and the Lira gradually slips further. Overall, the economic situation across the recycling destinations remains precarious, with currencies weakening by the day and a shortage of U.S. Dollars in those countries, governments and banks are failing to sanction suitable financing for a ship recycling that they do not see as imperative under the current climate”, GMS concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide