Ship Recycling: Tonnage Still Scarce, But Demand is on the Rise

The ship recycling market is seemingly on the rise again, despite the fact that not too many candidates are available. In its latest weekly report, shipbroker Clarkson Platou Hellas said that “market supply remains thin on the ground, however we are certainly seeing more inquiry and facing more questions from ship owners relating to the ship recycling industry. More supply looks set to come from the container feeder type sector, although the actual deluge of such tonnage that parties are predicting will not materialise for many months yet in our opinion. Some encouraging news from India arrived this week by way of assistance to the recycling industry by the Indian Government. A notification was circulated announcing that all duties on importing tonnage for recycling which should help to increase market sentiment/rates by some 3-5%”, the shipbroker said.

It added that “following many months of low activity due to the ongoing Letter of Credit issues, the recycling market in Bangladesh looks to have finally resurrected with more Letters of Credit being opened, still for smaller units, but also possibly for larger financial backing. With this in mind, price levels for the smaller units should improve pre-Ramadan. It is believed that the recyclers have found alternative methods of finding ways to purchase tonnage. There will certainly be more optimism once we see more supply arriving, and delivering, to the yards in Chattogram. Pakistan unfortunately remains quiet”, Clarkson Platou Hellas concluded.

Meanwhile, in a separate report, GMS (www.gmsinc.net), the world’s leading cash buyer of ships said that “it is the Bangladeshi market that has been impressing everybody of late (and for yet another week) with a lot of pent-up demand being realized and even news of some choice purchases at decent numbers on units that have managed to receive L/C approvals. Indeed, we have once again seen levels over USD 600/LDT in Bangladesh for the first time since the same time last year, and competing markets are increasingly struggling to keep up. India has been trying its best too and has managed to secure a number of HKC green sales this year, but there is no competing with a rampant Chattogram market when they start to fire up, and it is now a case of ensuring L/Cs are in order before committing vessels at decent levels once again.

Of course, not every buyer is able to secure the requisite financing to open L/Cs, especially those that have to go through government/ state banks and are not able to transact government-controlled U.S. Dollar reserves on vessels for recycling. Therefore, through private financing channels or with usance L/Cs, end buyers in Bangladesh are finding ways to secure much needed tonnage, with yards having virtually emptied over the last 6 – 8 months as the current L/C crisis rumbles on and markets declined from the peaks of over USD 700/LDT seen last year. Pakistan regrettably remains sidelined for yet another week, neither competitive on price nor are local buyers able to come up with appropriate L/C financing to import vessels for the time being, resulting in a port report that has not welcomed any fresh tonnage for the last two weeks. Finally, the Turkish market continues to firm up as both import and steel plate prices registered improvements this week, vessel prices climb another USD 20/Ton, and private sales have reportedly registered into this market”, GMS concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide