Ship Recycling: “Peace and Quiet” is the Norm

The ship recycling market has began 2023 in the same “serene” mode it left 2022. In its latest weekly report, shipbroker Clarkson Platou Hellas said that “as we hop towards the end of January, market activity remains distinctively quiet with the lack of available tonnage still evident and only a smattering of units seemingly workable. Some concerning news emanated from Pakistan this week where the Pakistan Ship Breakers Association made a direct appeal to their Prime Minister and government to save their industry from complete closure”.

According to the shipbroker, “the recent financial turmoil that has engulfed the country has resulted in the reluctance of banks to open Letters of Credit (L/C’s) to import vessels for recycling which in turn affect the production of raw materials for the steel industry. The delay, or non-opening, of L/C’s for ship recycling will have a negative effect on the ship recycling industry and subsequently the steel and construction sectors.

The direct appeal from the association this week is reportedly a final push to obtain some assistance and help in saving all industries connected with ship recycling including construction and the domestic steel markets. Elsewhere, Bangladesh continues to suffer from a similar situation to Pakistan with only the smaller units able to deliver to the recycling yards and therefore, India continues to be the most dominant with the vibrant domestic steel markets providing firm price levels for any vessel that is circulated. With the Lunar holidays commencing from today, we are expecting a very quiet time in shipping as a whole next week”, Clarkson Platou Hellas concluded.

In a separate note, GMS (www.gmsinc.net), the world’s leading cash buyer of ships commented that “a degree of increased positivity has entered recycling markets this week, as prices push on in both India (off the back of firming steel and settling currencies) and Bangladesh (off of a rising demand and a currency that has recently found its stability around BDT 105). In fact, a number of sales have reportedly even taken place at increasingly firm numbers, giving Ship Owners a greater sense of confidence to offer their recycling candidates up for sale, especially after an altogether bleak 2 quarters. Financing problems persist in both Bangladesh and Pakistan, but End Buyers in both locations are endeavoring to find alternate solutions (rarely successful at this stage) to open L/Cs (including private financing not going through government banks, foreign currency L/Cs and even usance L/Cs), now that markets seem to be stabilizing and even firming up again.

Plots across most locations remain fairly barren after one of the slowest years (in terms of recycling volumes) in decades and as such, demand for new units is ramping up across all markets and as prices increase, so too do the number of available candidates for sale after a relative dearth at the end of last year. Even in Turkey, despite a drop in steel plates and a currency that has been relatively unchanged for the last couple of weeks, prices have held their ground amidst growing news of units being talked about basis a Spring delivery. Overall, the supply of vessels is mostly coming from the container sector (with another sold this week) and an increasing number of HKC green sales – thus putting the deal focus squarely on Alang for another week. Moreover, as dry bulk charter rates weaken and we enter a period of relative inactivity due to Chinese New Year holidays, we do expect to see even more dry candidates heading the recycling path in the weeks / months ahead”, GMS concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide