Ship Recycling Activity Enters “Slow” Season

The ship demolition market has officially entered its slow season, as is usually the case during the summer months. In its latest weekly report, shipbroker Clarkson Platou Hellas said that “the arrival of the racing festival this week at Royal Ascot here in the U.K. clearly confirms that we are now galloping through the summer months and into seasonal holidays, and with it brings continued slowdown in activity and a dearth of available tonnage”.

According to the shipbroker, “demand for tonnage by the recyclers is evident, even to the extent that cash buyers are circulating purchase enquiries, a rarity in this industry. The wise decision for owners who are contemplating the sale of their vessel for recycling is to grab the firm numbers currently on the table whilst tonnage is in short supply as the latter end to the year is certainly attracting similar vibes from many pundits in the industry about the larger volume of tonnage that will arrive to the recycling shores. On top of the analyst predictions, there is hope the tide will turn with an aging fleet increasingly growing, but on the wet side, many of the tanker units are forming part of the dark fleet which will be intriguing as to how these units are sold when the inevitable sales are due. Looking at the markets, India remains the most stable, although are being outbid by their Bangladeshi counterparts but these latter recyclers continue to have L/C implications and most sales are being concluded on a case-by-case scenario. The delays, if any, are purely depending on which recycler a vessel is resold to. The Pakistan industry remains dormant due to the financial and political turmoil, although there have been one or two inquiries reaching out from this destination. sit and wait till the supply of units escalate and subsequently, most likely, be in a position to purchase at lower rates”, Clarkson Platou Hellas concluded.

In a similar note, shipbroker Allied Shipbroking added that it was “a fairly quiet week in the quieter summer period, heightened in Bangladesh as financing issues begin to bite again. Weakening fundamentals in Bangladesh are likely applying downward pressure on breakers’ prices although they still remain the most attractive by far. Sales last week were on an as is basis, and although we can’t be certain, the premium offered in Bangladesh will likely see the three vessels make their way there. The sale of the ‘Seapeak Polar’ achieved a firm US$637/ldt on an as is basis in the UAE. This is the second vessel they have disposed of so far this year and brings the total number of LNG carriers sold for recycling this year to 5 vessels, in addition to two large LPG vessels, with an average age of 36. Bangladesh’s approval of the HKC appears to have spurred on action from Liberia, who are expected to ratify the convention on Monday (26th June) and satisfy the last of the conditions required to bring the legislation into force. There will be the potentially for the content of the text to be revisited and the regulations could be further tightened.

Meanwhile, GMS (www.gmsinc.net), the world’s leading cash buyer of ships said this week that “after last week’s positive news surrounding Bangladesh’s ratification of the Hong Kong Convention, it has been a comparatively muted week in terms of sentiments, sales, and activity, especially as financial constraints continue to hamper the efforts of Chattogram Buyers in keeping domestic yards busy / occupied, especially as new construction and infrastructure projects look to be initiated in the country post-Budget. Earlier this year, we had witnessed severe difficulties in Bangladesh with the government focusing only on essential items for the expenditure of its dwindling U.S. Dollar reserves – reportedly food, fuel, and fertilizers. It appears that post-budget, Chattogram (and the ship recycling market at large) will once again have difficulties in obtaining L/C approvals on incoming vessels and it is likely to be a quieter summer for this market as a result.

As we also tend to see a traditionally quieter summer / monsoon season, it is undoubtedly turning out to be particularly challenging time for Bangladeshi Recyclers this time around, as most end users are already struggling to obtain financing on units and have therefore abstained from the offering for another week. The onset of Eid holidays and celebrations has also not assisted the current situation as many labourers and office staff head back to hometowns for several weeks (even though Eid holidays end on 1 July) while nearly all of the yards virtually close and activity subsides over the rainy season (especially in Bangladesh and India). In the far end on the West, Turkish Recyclers turn increasingly frustrated on that Lira that has been in freefall for 18 months now and has weakened by a nearly catastrophic 200% during this time. As such, the sales board for the overall industry remains bleak for another week and any Owners or Cash Buyers with tonnage to sell have certainly become frustrated with a lack of overall appetite, weak(ish) prices and an willingness to buy from the various recycling destinations”, GMS concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide