Ship Recycling Activity Muted as Pakistan Turmoil Hits Sales

Ship recycling activity remained muted for the most part over the past week, with one of the major markets, i.e. Pakistan, has remained off limits. In its latest weekly report, shipbroker Clarkson Platou Hellas said that “with the well-publicised political instability and turmoil in Pakistan dominating the headlines, the recycling market at this destination looks set to remain dormant for several months, at least, and how this will affect the local ship recycling community remains to be seen. What the future holds is anyone’s guess, but until some semblance of confidence returns, backed by financial loans to kickstart their economy, then this sleeping giant will most likely have to watch on from the side-lines. The recent fall in Bangladesh appears to have stabilised this week and the domestic steel markets have reportedly recovered slightly. The most stable of destinations for the time being seems to be the Indian market, however, appetite to procure new tonnage eased somewhat this week, unless Owners are willing to consider the new, reduced, levels on the bidding table. There are also several vessels still being pushed for HKC approved green recycling which is starting to fill some of the compliant yards and with the monsoon rains on the horizon, maybe a quiet spell will be seen at Alang. Looking west, the Turkish market suffered a significant drop this week due to the uncertain political future with the elections taking place this weekend. The uncertainty of the currency and economy due to the forthcoming elections is causing this sudden negative sentiment, but the hope is some rebound will be seen, obviously depending on the outcome”, the shipbroker said.

In a separate note, shipbroker Allied added that it was “yet another quiet week for ship recycling activity in which India remained the leading destination for vessels despite Bangladeshi breakers offering higher prices on paper. The ancient 46-year-old ‘Gandria’ will be heading for HKC recycling in India. The low price reflects the sale on an ‘as is’ basis in Labuan, Malaysia, and the fact that its final voyage will take place under tow. The ‘Ever Diadem’ has been sold for HKC recycling and is anticipated to also head to India. The sale marks the first Evergreen containership sale for scrap in three years.

The ‘Shandong Express’ is an example the leading prices that Bangladeshi yards can offer without LC issues. Prices have steadied in both Indian and Bangladesh after their recent falls, but the above market rate for this particular sale is due to the inclusion of 360T of VLSFO and LSMGO. A factor in these declines is likely to have been the recent decline in steel demand and corresponding drop in prices. Having steadied for now, we might see corresponding stability reflected in prices offered by yards in the coming weeks”, Allied noted.

Meanwhile, in its latest weekly report, GMS (www.gmsinc.net), the world’s leading cash buyer of ships said that “after some recent alarming declines in the sub-continent markets, we appeared to have reached the bottom early this week as a certain “stability” across the markets led to some greater confidence to acquire some of the slim pickings of tonnage currently available for recycling. However, as the week came to an end, global currencies seemed to suffer against the U.S. Dollar in unison, as all of the major ship recycling destinations faced some declines (especially in Pakistan), leaving sentiments under pressure. This, even though local steel prices started leveling out after weeks of flatlining and even declining by about USD 25/LDT in India over the course of the month, while Bangladesh likewise deteriorated during April where Buyers finally emerged eager to negotiate post-Eid.

As we head into these traditionally quieter summer / monsoon months, the number of available candidates remains low and by some accounts, seems to have slowed even further this week, as charter markets for the previously beleaguered Dry Bulk and Container sectors continue to display a greater stability to keep vessels trading. Pakistan expectedly remains out of the picture as political and economic uncertainty continues to wreck the country with this most recent arrest of Ex-Prime Minister Imran Khan and impending domestic unrest, in addition to the Pakistani Rupee that has further depreciated to record lows against the U.S. Dollar, leaving End Buyers reeling once again. There is also the upcoming Bangladeshi budget in early June to be aware of, as many End Buyers are choosing to wait-and-watch the results of the budget before offering firm on tonnage once again, even though there are few expectations of any significant changes to be made for the ship recycling sector. Finally, the Turkish market remains suspended in nowhere land, leading to absolute silence. As prices therefore stabilize across sub-continent markets and demand seems as though it is ramping up again after the various holidays, we can only hope that a trickle of vessels we are so far seeing starts to increase and empty plots start to fill up again”, GMS concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide