Sustainable Ship Recycling Takes Major Step Forward

A significant development in the ship recycling market has taken place this week. In its latest weekly report, shipbroker Allied Shipbroking said that “before any sales, the main news this week is the big step taken towards the ratification of the HKC following the approval from the Bangladesh government. Hopefully, ratification will follow in the coming months and a step forward will have been taken towards more sustainable ship recycling, while acknowledging that the convention will still leave plenty of room for improvement. In the meantime, the market lacks strength and few additional vessels are heading for demolition after last week. After a modest flow of dry bulk and container vessels to date this year, it seems supply is drying up. If the dry bulk market remains steady or even continues to recover lost ground, we can expect to see even fewer recycling candidates over the coming weeks. Tanker earnings remain at levels that support the long trading life of a vessel and unless there is a dramatic unwinding of market demand, we shouldn’t expect any but the very oldest of vessels to appear on the market. MSC is throwing a lifeline to Indian HKC yards, with a total of seven vessels sold there so far this year”.

In a separate note, shipbroker Clarkson Platou Hellas said that “market conditions remain stable with the lack of tonnage continuing to frustrate those recyclers that have empty yards. Having attended the Tradewinds Shipowners Forum during Norshipping, it was interesting that a main topic centred on future opportunities concerning LNG fuel and cleaner emissions, with more emphasis focussing on the renewal of the existing global fleet to environmentally friendly trades.

Moving on from the discussions, the surprising factor is why are we not seeing more units circulating for recycling? The pressure is certainly being ramped up on ship Owners to bring their aging vessels to the new appropriate standards or consider the recycling of their tonnage and therefore, we certainly expect the supply to the recycling industry to step up from Q4 this year onwards through the next few years. Meantime, as of today, Bangladesh and India remain the dominant areas in the Indian sub-Continent with Pakistan still only able to watch from the sidelines due to their ongoing financial implications”.

Meanwhile, GMS (www.gmsinc.net), the world’s leading cash buyer of ships added that “despite an overall neutral-to-positive budget in Bangladesh last week, the Central Bank has curiously decided to impose restrictions on L/Cs once again, reportedly due to the ongoing shortage of foreign currency / U.S. Dollar reserves in the country, as inflation / currency depreciations continue to hammer away at a majority of the global recycling destinations. Discussions are ongoing locally in order to address / resolve this situation. For the time being, however, there has been a pause on fresh sales into Bangladesh as without vessel financing / L/Cs in place, it is simply not possible to procure any tonnage. Indian fundamentals have also improved, having seen some positive moves on the Indian Rupee over the last few weeks, in addition to steel gains that are providing End Buyers with further encouragement and confidence to improve some of their previously lowish levels on offers. This might eventually help those garish Cash Buyers who have been offering above market levels on some of the recent units.

For now, Pakistan remains the only sub-continent destination that is totally out of the picture, and this is due to the ongoing political unrest and economic calamity that has seen its currency lose much of its value over the last few years. At the West end, Turkey passes through a reflection of last week, with opposing fundamentals and a Lira that’s essentially fallen off the wagon. In the overall market today, the only thing lacking is a decent supply of tonnage to keep End Buyers busy and their yards occupied, as we head into the summer / holiday season and many ship owners and yard laborers head on holidays during the warmer / monsoon months. Finally, after a busy first quarter of recycling, a minimal number of tankers have been proposed so far this year as containers seem to have all but vanished from the market, with over 25 container units sold for varying degrees of HKC recycling. Even dry bulk supply has started to dwindle (apart from a busy Far East / China market that is still shedding older units) and so until more tonnage is introduced, we can expect all of the markets to remain sluggish”, GMS concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide