Ship Recycling: Holy Month of Ramadan Slows Down Demolition Market

A slowdown in the ship recycling market should be expected in the following weeks, as a result of the holy month of Ramadan. In its latest weekly report, shipbroker Clarkson Platou Hellas said that “the holy month of Ramadan has arrived which seasonally, will ensure a lack of appetite from the recyclers to engage in new negotiations. Market activity has slowed anyway due to the lack of tonnage supply as ship owners try to benefit from the rebounding freight markets. There are reports that a slight softening on price levels have materialised this week from both Bangladesh and India, although these are predicted to only be a temporary measure.

This quiet time will enable the Bangladeshi recyclers to digest the tonnage recently acquired following their well-publicised financial constraints. There certainly has been a larger volume of arrivals to the Chattogram shores over recent weeks compared to the arrivals at their counterparts in India. Finally, there has been an announcement made by the local custom authorities in Alang, India whereby in addition to the regular Notice of Readiness delivery documents required for completing inward clearance, the following additional clauses are to be included in future contracts:

1. Survey report for bunker on board of inside and outside the engine room tanks and also, confirming all tanks are connected
with each other.
2. Certificate from Master confirming all tanks and pipeline are connected with each other on vessel”, the shipbroker concluded

In a separate report, shipbroker Allied commented that it was “a week somewhat quieter than the last, in which there were a modest number of smaller vessels for sale and just one sizeable sale. MSC has sold its third tanker this year, following the two sales reported last month and represented a more significant disposal at more than double the LDT of each of its previous disposals this year. Now that record containership earnings are very much a thing of the past and given the healthy number of deliveries due, we might expect this segment to remain a feature of the recycling market for some time. The vessel is expected to head to India for HKC recycling despite the higher prices offered by Bangladeshi breakers, perhaps reflecting the relative ease of financing purchases in India. Kabir Ship Recycling has become Bangladesh’s third HKC certified compliant yard although there haven’t yet been signs that tonnage is being attracted away from the better established Indian green-recycling yards. With the onset of Ramadan, the market may quieten down a little in Bangladesh and would likely do the same in Pakistan, if it weren’t already in stasis”, Allied concluded.

Meanwhile, GMS (www.gmsinc.net), the world’s leading cash buyer of ships, said this week that “sub-continent markets appear to be more tentatively poised this week, with a cooling demand and lower levels that are increasingly reflective of domestic steel prices and have likely peaked. Several sales were concluded at impressive numbers over the space of one or (maximum) two weeks before prices started to decline again by about USD 20/LDT, returning to the relative normalities of recent times. That being said, prices are still trading above USD 600/LDT in Bangladesh and are not too far from that in India, with only Pakistan (and even Turkey) lagging significantly behind and out of the reckoning for another week.

As far as Turkey goes, other than the weekly fluctuation in steel plate prices and the Lira depreciating, not a whole lot has changed with this market that has been deprived of tonnage for a while now. Overall, the supply of tonnage also seems to have slowed, which is encouraging for Cash Buyers with existing inventories in order to get their desired levels and not distracted by the supposed deluge of tonnage that many ship recyclers have been fearing will greet their shores. Indeed, container charter rates have picked up from their lows seen earlier this year and so too have dry bulk levels enjoyed a rise in rates, which will see vessels from these two sectors arrive at a slower overall pace over the immediate future. This will (hopefully) allow both Bangladeshi and Pakistani markets to sort out their chronic L/C financing issues, with it still taking much longer in order to open L/Cs and obtain bank approvals (often if going through state central government banks no approvals are forthcoming at all for the time being)”, GMS concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide