Ship Recycling: Small Container Ships Sold for Scrap

The ship recycling market has had a positive week after a long time, thanks to a renewed supply of vintage tonnage. In its latest weekly report, shipbroker Clarkson Platou Hellas said that “this week has seen a strong supply of smaller container units circulated into the market which could be the sign of things to come. With about 10-15 smaller container vessels reportedly being discussed in the recycling market this week, ten from one Far Eastern owner, this is the indicative sign that the container bubble has finally burst. We hasten to add that we are not expecting a deluge of such tonnage, particularly the larger size, but it is encouraging for the recyclers to finally see some more units come to the table, especially as the container units are one of their preferred types. Further good news is that the Indian recycling market has seen a further surge in price levels this week, on the back of an increase in the domestic steel market, with price levels having jumped northward by some USD 30-40/ldt. Therefore, these Container units that have come fresh into the market, if sold, should see some impressive numbers compared to what we have witnessed in recent weeks. Away from India, bleak news in these winter months continues from Bangladesh and Pakistan”.

According to Clarkson Platou Hellas, “the financial restraints that have dominated the recyclers minds in these destinations for several months now continues. In Bangladesh, the local plate market fell by some 500-taka adding to the negative feel. In addition, reports emanated from the area that the L/C situation (lack of foreign exchange) is estimated to improve only by the end of January/February 2023 when the IMF loan would be approved – funding for humanitarian supplies will obviously be catered for first prior to the ship recycling/other sectors. No finance is still being approved for tonnage over 4-5,000 LDT. In Pakistan, it was reported that steel producers, drug manufacturers amongst many industries are also facing problems in opening ‘import’ Letters of Credit amid the shortage of U.S. Dollars.

It is understood that a ship recycler will only be able to obtain maximum USD 300,000/500,000 per week which means that a Letter of Credit of say USD 10.0 mill for example will take approximately four months. With this news, the recyclers are now contemplating how to move forward – the situation could parallel that of Bangladesh where there will be more demand for the smaller vessels of between 6-12,000 LDT. Analysts predict that the Pakistani Rupee is to lose its value by over 20% in the coming next seven months, against the US Dollar. These are certainly tough times for the recyclers in Bangladesh and Pakistan, where they will need to remain resilient. There is still strong demand to buy tonnage, however their hands are now tied concerning their financing prowess”.

Meanwhile, in a separate note this week, GMS (www.gmsinc.net), the world’s leading cash buyer of ships said that “after the last few weeks of insufferable performances from the major recycling markets, a shade of positivity was observed this week, as Owners seem more confident in testing the waters and welcoming firm offers, especially those that are above USD 500/LDT. On the back of this seemingly positive note, one or two market sales of note even materialized this week and it does seem as though prices have bottomed out and sentiments have flatlined after losing a rather rattling USD 200/LDT, seen from the peaks witnessed earlier this year. Bangladesh continues to struggle with L/C financing limits, but the IMF loan is reportedly in the works of being approved and with most yards currently lying empty, we expect demand and consequently prices to come back, especially once some liquidity is injected back into the domestic market. Pakistan remains utterly tentative on new purchases, so significant have the falls been so far this year on both the currency and steel prices. On the West End, Turkey remains buoyant at its terrible lows, with marginal (at best) improvements in fundamentals being the only news emanating from this market anymore. As such, the market of the moment continues to be India and despite a few of HKC units also working, nearly all Cash Buyer ‘as is’ sales are being presently finalized with an Alang resale in mind. It still remains a mystery whether it may be a slightly busier end to the year than many had been anticipating, especially with further sales likely to take place to a more settled and confident Indian sub-continent recycling market. Once the currency situation starts to stabilize in Pakistan and funds start to become more readily available in Bangladesh, then we really could see prices push on”, GMS concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide