Tonnage Supply Hampers Further Ship Recycling

The apparent lack of more willing sellers has hampered any further growth in the ship recycling market, over the course of the past week. In its latest weekly report, shipbroker Clarkson Platou Hellas said that “Bangladeshi recyclers continue to lead the way in the market, with improved price levels being seen for any available tonnage this week! Whilst there is talk of several Chinese owned units being circulated into the market, either potential or definite candidates, the general supply looks to have diminished from recent weeks. We also have Ramadan just around the corner, where activity looks set to slow down as we approach April. Furthermore, there remains firm interest from Indian Recyclers once again to acquire tonnage, however their price levels have now fallen by the wayside compared to Bangladesh and with little ‘HKC compliant’ tonnage coming for sale, we do foresee a quieter period for the Alang industry. Once again Pakistan remains out of the picture for the time being as its banking restrictions look set to continue, hampering local recycler’s ability to compete. The lack of available tonnage on offer, should help sentiment and increase appetite, which will only be positive at this time from the shores of Chattogram and Alang”.

In a separate note, shipbroker Allied added that “Bangladeshi breakers really proved themselves to be the destination of choice last week as prices continued to extend above what Indian breakers could offer, and three vessels were sold for recycling there. Buyers have been able to find funding for vessels as large as the 22,159 LDT “Sunny Voyager” and progress towards meeting all IMF conditions continues, the government planning adjustments to taxes and interest rates. In the meantime, the most acute pressures have eased although it is not obvious that this will translate to higher purchasing rates than we have seen over recent weeks, due to the improved state of the dry bulk market and sustained, high tanker earnings.

Pakistani breakers remain out of the market as the stability in the form of IMF support remains just slightly beyond reach. The latest hurdle is the IMF demand that existing debt must be restructured, before it will disburse funds. With China appearing somewhat reluctant to renegotiate the US$ 30 billion owed to it, there is no immediate end to these current difficulties in sight”, the shipbroker said.

Meanwhile, GMS (www.gmsinc.net), the world’s leading cash buyer of ships, said in its latest report that “the ongoing surge in recycling rates has sustained for another week, even though a slight reduction in supply coupled with some volatility on steel plate prices (especially in India), seemed to put a minor dampener across markets over the last few days. An improvement in Container and Dry Bulk charter rates has reduced the flow of candidates for recycling over the last couple of weeks and so much of the firming local demand may still go unrealized for some time. Indeed, there has only been a trickle of vessels for sale in this last week, and so only a few Owners appear to have cashed in at these higher rates, perhaps at the peak of the market. As such, given the diminishing supply and firming demand, prices continue to impress, particularly in a Bangladeshi market that has essentially been starved of tonnage over the last 6 – 8 months due to persistent L/C issues.

Alternate methods of financing have been established (including usance L/Cs and private financing solutions) to secure some of the recent tonnage for Chattogram Buyers. Yet, the current preference amongst local Recyclers (given the ongoing L/C restrictions) remains in trying to acquire smaller LDT tonnage, rather than the costlier large LDT vessels that may not get L/C approval – so dire is the shortage of U.S. Dollars in the country at present. Talks over ongoing IMF loans continue in both Pakistan and Bangladesh, and once that is finalized, we should see some greater liquidity on L/Cs and the ability for all Recyclers in these markets to secure larger LDT vessels at firmer levels. Finally, Turkey at the far end remains healthy and steady, with no changes reported in steel and still no reports on the mysterious negotiations that were reportedly taking place over recent weeks”, GMS concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide