Ship Recycling: Will Pakistan Return to the Market

The ship recycling market could receive an additional boost from the rumored return of Pakistan. In its latest weekly report, shipbroker Clarkson Platou Hellas commented that “some interesting news circulated within the industry this week with reports that Pakistan may soon be in a position to return to the bidding table. The Pakistani rupee strengthened against the U. S. Dollar this week in their first trading session on the back of a funding agreement from the International Monetary Fund (IMF). This could be significant for the recycling industry as will once again create competition to their counterparts in Bangladesh and India, obviously for ‘non-green’ units. The general view is that there would be significant demand from the recyclers to procure tonnage following major internal disasters and the potential rebuilding programmes that are sure to occur following this financial assistance”, said the shipbroker.

Clarkson Platou Hellas also noted that “elsewhere, Bangladesh appears to be the most stable area in the Indian sub. Continent, although the ongoing Letter of Credit issues still surface. Price levels from India this week softened, not only due to the current monsoon season which seasonally creates negative sentiment, but also surrounds subdued local steel markets. Price levels are somewhat noncompetitive with their counterparts from Chattogram. Moving West, the Turkish market is receiving several proposals for E.U. approved recycling which will once again raise the capacity questions and may lead to some staggered deliveries for such business, and the expectation is to see some more weakening of the Turkish Lira against the U.S. Dollar which may see market take a slight dip during the summer months. But if the supply slows, then possibly improvements will be seen towards the end of the summer holiday season”, the shipbroker concluded.

Meanwhile, GMS, the world’s leading cash buyer of ships, said this week that “with many sub-continent yards still closed post Eid holidays, mixed in with the ongoing monsoon season, and all of it brewing in a stew of a total lack of tonnage, it has certainly been another lethargic and inactive week (and a majority of the year so far) for recycling sales as we enter the 3rd quarter of 2023 and prices being quoted are so unworkably below market expectations at present, a bounce back anytime soon seems unlikely. As such, before proposing any further candidates, most Cash Buyers and (especially) Ship Owners have decided to continue to wait and watch the markets for greater stability and a better handle on pricing. Meanwhile, after a couple of volatile quarters, fundamentals presently seem to have leveled out across the board in the Indian sub-continent and even Turkish recycling markets, where steel plate prices and currencies (except in Pakistan) seem to have found a brief plateau of peace.

Moreover, an ongoing lack of workable Letters of Credit (L/Cs) & financing in Pakistan and even in a post-budget Bangladesh is once again driving prices and demand down as the Central Government Bank in Bangladesh seeks to impose tougher limits on the expenditure of its precious U.S. Dollar reserves. Overall, amidst the ongoing crippling lack of tonnage, those Owners with units closer to recycling age have been seriously reconsidering placing their vessels back into service and are invariably adding to the growing lack of tonnage. With monsoon’s being the only silver-lining for the sub-continent markets – in that cutting activities come to a crawl as it is – it certainly seems to be a quieter July (and perhaps even August) headed the industry’s way”, GMS concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide