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Allied Shipbroking added that “financing issues in Pakistan have reportedly led to two ships instead heading to India, both of which would have represented sizeable sales at over 20,000 LDT each. The State Bank of Pakistan is struggling with its dollar reserves and perhaps is beginning to head the way of Bangladesh, with restrictions and delays on opening Letters of Credit, preventing breakers from financing large acquisitions.
Related difficulties in acquiring raw materials could in theory support scrap price levels, if financing can be found, but if the economy deteriorates too far, we may experience destruction of this demand for scrap in the future. A clear trend has emerged through December and has continued this month for Indian breakers to land the largest vessels, and for as long as this financing dynamic continues, it seems likely for this trend to continue. However, if we see an increase in fresh tonnage, it could be interesting to see how the market behaves with two of the three major players unable to fill their slots while scrap prices remain high, relative to the past five years”, Allied said.
In a separate report this week, GMS (www.gmsinc.net) said that “markets seem poised for some sort of recovery as steel prices inch up again (especially in India and Pakistan) and currencies seem to find a newfound acceptance at historic lows across the major recycling destinations, after what has been a bitterly silent 2022 full of declines and falls. Financing remains of chief concern in both Bangladesh and Pakistan, with very few end users capable of opening fresh L/Cs on the import of vessels, although some are getting on by with private financing, which usually means and usance (rather than sight) L/Cs or higher interest rates. The focus therefore falls on India for another week, on the few vessels that are available from larger Container Owners.
Most of these are for HKC recycling only, and as such, would be heading to Alang anyway, regardless of the L/C concerns elsewhere. With the Chinese New Year only about a week or so away, there is perhaps a shortage of candidates as owners wait to see if freight rates improve after China returns, particularly with its Zero-Covid policy having been recently abandoned and world economies continue to try getting back to normal. If the mooted IMF loan to Bangladesh can finally be negotiated to ease the financial crisis there, we may see further competition from a traditionally bullish Chattogram market. Buyers in Pakistan are similarly keen to buy, but without L/C financing, it is currently very hard for Cash Buyers to get paid at present, so this is another wait-and-watch scenario for this market for now. On the far end, Turkey continues to impress as plate prices improve and despite a continually weakening Lira, local prices continue to firm up, perhaps thanks to some of the Turkey only candidates that are rumored to be working basis an early Spring delivery”, GMS concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide
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