Ships Aren’t Being Scrapped With Enough Pace

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Ships Aren’t Being Scrapped With Enough Pace

in Hellenic Shipping News 20/09/2019

The activity in the ships’ recycling market has been lacklustre for a series of months now, in direct correlation with the rebound in freight rates. As a result things are starting to shift when it comes to market fundamentals, with tonnage supply showing early signs of a rebound. In its latest weekly report, shipbroker Clarkson Platou Hellas said that “with September now in full swing, many felt that this was the time that we would experience a pickup in activity, after the summer lull witnessed, however, this has yet to materialize and we now feel that any turn around in sentiment and tonnage supply may only be seen late October or early November post Diwali festivities). This has resulted in a very stale market with no real change from the previous weeks in pricing and, more importantly, demand from the recyclers themselves as they cautiously analyse their local steel markets which are yet to give them any signs of encouragement. There currently remains little incentive for Owners to consider recycling whilst they continue to benefit from the strong chartering rates which are now thriving across all sectors, preventing Owners from examining price levels from the waterfront. Ultimately, there is little hope of seeing any future supply of tonnage for the foreseeable future. Turkey also appears to have had a negative correction with prices now in the low-mid 200’s after steel markets lost confidence/value affected by the continuing uncertainty created by the USA/China trade war”.

In a similar note, Allied Shipbroking added that “despite the fact that we are fast approaching the final quarter of the year, activity seems to have remained in its summer sluggish mode for now, with limited interest being seen amongst cash-buyers of late. Even in Bangladesh, where demand was at very impressive levels during early part of the year, activity has now slowed down considerably. The already fulfilled slots and the recent introduction of a VAT rise on demolition sales seems to have reduced appetite. However, it is expected that cash-buyers will resume their usual activity levels sooner rather than later, as they still remain the most attractive option in the region. In India, with local steel prices sliding even lower this past week and with the Indian Rupee remaining very weak, we do not expect any significant changes to be noted over the coming days. Finally, Pakistan has not shown any fair signs of recovery for several months now, with local breakers’ slots remaining empty once again. Given that market fundamentals have remained bearish, things are likely to hold quiet for a little while longer”.

Meanwhile, in a separate note this past week, GMS, the world’s leading cash buyer said that “despite the fourth quarter of the year being well under way, it has been surprising to see the Indian subcontinent markets still stuck in the ongoing doldrums. As we reach the middle of September, markets have not been this depressed for several years (at least) and the pervading negativity seems to show few signs of abating. Bangladeshi plots remain stocked after a heavy first half year of buying and a longer rainy / monsoon season has seen minimal product shift from domestic yards over the summer months. With local steel plate prices having maintained overall previous levels, most are expecting a return to some sort of form in the weeks / months ahead, but it seems to be a process slower than what industry players were previously anticipating. There is also the lingering hope that the BSBA will eventually overturn the recent increase in VAT that was imposed during the June 13th budget and that the recent influx of cheap Chinese billets also slows a little, especially given a cooling in the trade war scenario between China and the U.S.”

GMS added that “on the other side, India remains highly inert and very few end Buyers are willing to discuss fresh units at this time – such has the ferocity of recent falls been in Alang. Steel prices have also crashed by about USD 75/LDT (with further declines this week) whilst the currency has depreciated by about 2%, from Rs. 69 to the U.S. Dollar to well above Rs. 72 in recent times. There has seemingly been a firming interest in Pakistan to acquire new units over the last few months, but prices and confidence remain far too tentative and sluggish, given well over a year of inactivity on Gadani shores and as damaging cheap Iranian billets continue to flood the market for much of this year”.
Nikos Roussanoglou, Hellenic Shipping News Worldwide

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