Ship Recycling Market Faces Headwinds

The ship recycling market has returned to a “gloomy” state over the course of the past week. In its latest weekly report, shipbroker Clarkson Platou Hellas commented that “this week clearly sums up the difficulties associated with the ship recycling industry and shows how each seven-day period can differ. Contradicting recent reports, Bangladesh has found old problems returning with the restrictions surrounding the foreign exchange and opening of Letters of Credit resurfacing. There are reports of several vessels, recently arrived to the anchorage at Chattogram, now idle waiting for the L/C’s to open. Market sentiment has also affected the recyclers mentality as a declining trend is being promoted from the waterfront with many now providing indications lower compared to recent weeks. With Ramadan coming to an end, the hope is that a resurgence of interest and improved price levels will arrive from the recyclers from Bangladesh in a couple of weeks’ time, after their EID holidays. Elsewhere, Indian remains the more stable market of the Sub. Continent destinations and the lack of tonnage supply should ensure price levels maintain their firm stance”, the shipbroker concluded.

Meanwhile, in a separate note this week, GMS (www.gmsinc.net), the world’s leading cash buyer of ships, added that “a comparable gloom has descended across all of the major ship recycling destinations whilst prices, demand, and sentiments are all retreating, as a miserable supply of tonnage and continued struggles on L/C financing issues plague the most recent deliveries into Bangladesh and Pakistan, the recycling industry has certainly been through a tough and quiet week. The ongoing month of Ramadan has also led to much softer sentiments across the board, as ongoing religious festivities are observed, and business takes a backseat for the time being. Volatile steel plate prices have not helped the current situation brewing at the various recycling destinations either, and this has seen most end users of fresh tonnage abstain from buying, choosing instead to wait and watch developments and how the market opens post Ramadan, before offering afresh on any new vessels being proposed”.

According to GMS, “the primary problem for recyclers at all the major locations is the ongoing and noticeably painful shortage in the supply of vessels for recycling, as freight markets in Dry Bulk and Containers have shown some renewed positivity of late. As such, after a decade long low supply and activity, last year even though it seemed as though it would been an overall busy and bullish start to 2023 for the major recycling markets.

However, things seem to be easing off even before May arrives and the customary cooling of performance in the sub-continent markets due to the oncoming Monsoon season will only further aggravate the present situation – despite the state of supply and the current (and plenty of) availability of space at dormant plots. Making matters worse, with both Bangladesh and Pakistan markets still requiring lengthy central state bank approval processes to open new L/Cs, it is certainly going to be a painful process to get vessels delivered (in time) moving forward, and patience / extra waiting times will certainly be required from those Owners / Cash Buyers seeking to deliver units moving forward. Lastly, the Turkish market echoes virtually identical sentiments and fundamentals as the sub-continent markets, including the Lira, which continues to relapsefurther every week.
Nikos Roussanoglou, Hellenic Shipping News Worldwide