Ship Recycling Market Faces Mismatch as Prices Diverge

Expected growth in the Ship recycling market

According to soures, the ship recycling market is experiencing a significant mismatch, as shipyards are reluctant to match the prices being offered. The latest weekly report from shipbroker Clarkson Platou Hellas highlighted the individuality of each sale, indicating that market conditions alone cannot explain the pricing discrepancies.

A notable instance cited in the report is a small container vessel with approximately 4,600 light displacement tons (ldt) that was sold for an unusually high price of USD 622.00 per ldt upon delivery to Bangladesh. This has created a substantial spread across all tonnage types, leaving industry players puzzled about the reasons behind such an exceptional sale. One possible explanation put forward is the opening of a Letter of Credit from Bangladesh, but the situation still remains surprising for many.

The difficulty recyclers are facing with their banks in opening Letters of Credit has been highlighted, with several units stranded outside Chattogram for weeks, waiting for the L/C process. As a result, some vessels are being diverted to India, where lower rates are being offered.

The prevailing talk within the market suggests that price levels are expected to weaken further in both Bangladesh and India. Many doubt any immediate rebound will be seen until after the holiday season. However, there is some optimism from Pakistan, where local recyclers may soon return to the bidding table, thanks to a loan from the International Monetary Fund (IMF).

In another observation, Allied Shipbroking noted that the ship recycling market has been characterized by quietness and poor sentiment. Steel markets across different ship recycling destinations are in different phases. In India, there is a sense that the market has bottomed out and steel prices could begin to rise. This could potentially close the gap between Indian breakers’ prices and those of their peers in the Indian Sub-Continent.

In Pakistan, there is growing optimism as China’s substantial loan rollover bolsters the country’s financial position following IMF support. While there have been no deals announced yet, there is a chance that ship recyclers could acquire vessels for demolition if they meet the high margin requirements for a Letter of Credit.

The situation in Turkey is relatively stable due to a neutral week for the Lira, and yards have managed to acquire two small vessels from the 1970s for recycling, despite weakening scrap steel prices.

However, the recycling sentiments remain negative overall, with very few open recyclers willing to offer realistic prices on the limited vessels available in the market. The ongoing slowdown in the sub-continent is attributed to ravaging monsoon rains, resulting in minimal cutting and recycling activities at yards.

Cash buyers and vessel owners are unwilling to accept some opportunistic offers in the market, leading to a standoff on many unsold vessels. One confirmed sale saw a container vessel controlled by Sinokor, which was committed for an extraordinary price into Bangladesh. However, this is considered an outlier and not reflective of current market conditions.

Enquiries have emerged from Pakistan, which may potentially lead to confirmed sales and establish a new direction for cash buyers and Gadani recyclers. India has slipped to the lowest placed market in the sub-continent as the supply of green ships and specialist units diminishes.

Overall, the ship recycling market remains uncertain, with prices and sentiments varying across different regions. The industry awaits developments in the coming weeks and months to see how the situation unfolds.

Sources: Hellenic Shipping News, Clarksons Platou, Allied Shipbroking & GMS.

Source Hellenic Shipping News
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