Shipbreaking Expected to Roar Ahead in 2020, as More Ships Could Head for Demolition

in Hellenic Shipping News 08/01/2020

2019 could be characterized as an underwhelming year in terms of demolition activity, at least in terms of the comparison between the initial expectations and the end result. However, 2020 could be the year of… redemption.

In its first report of the year, shipbroker Clarkson Platou Hellas said that “as we enter a new decade, it is interesting to recall the vast change to the ship recycling industry over the last 10 years and the positive resolution from India that all recycling yards will be Hong Kong Convention compliant (adopted 2009) within the next 2 years and the expectation that Bangladesh could closely follow suit. Incredible strides have occurred over the last decade by many of the actual ship recyclers themselves to upgrade their yards to a standard that provides a safe and environmentally friendly workplace for the labourers and the local habitat where the yards are located, obtaining plaudits from many along the way (although still attracting continued negative press from environmentalists) and relevant approvals from varied classification societies. The future is certainly looking greener for the recycling industry. In respect of the current market climate, obviously the holiday period has brought with it a much quieter market with little activity and many to still return to their offices, however the sentiment seems to have improved since the time preChristmas and therefore the feeling is that price indications have improved. Evidencing this is the sale of two small container units, reported below, that achieved impressive rates. All recycling destinations appear to have renewed inquiry to purchase tonnage which, in addition to firmer domestic steel prices, should equate to some competitive offering. It will need the first couple of weeks of 2020 to really determine how far the sentiment and price levels have improved”.

Meanwhile, in a separate note, GMS, the world’s leading cash buyer noted that “it has been a roaring start to the year with prices, particularly in India, pushing on to levels approaching (and in the case of certain containers, well above) USD 400/LT LDT. Local steel plate prices have continually been shooting up in Alang over the festive period with over USD 30/LDT gained, subsequently placing India atop the market rankings and in prime position to secure its share of the tonnage, going into what is expected to be a busy and seminal year ahead with the new low Sulphur regulations entering into force. Meanwhile, Pakistan and Bangladesh remain stranded some ways behind, but as we have witnessed historically (and even this week), Chattogram Buyers are liable to jump spectacularly on favored (and often larger LDT) tonnage. On the Western end, Turkey continues to suffer, firmer in price, a weakening Lira, and an ongoing tonnage drought that’s making industry players wonder just how long this market will continue this way”.

“Meanwhile, with many candidates expected to enter the market over the coming year (as higher fuel costs make running some of the older vessels particularly cost prohibitive), the subcontinent markets will likely have much of the market tonnage to share. However, with increasingly tighter bank sanctions on Letters of Credit (L/Cs), it will also be a challenging year for industry players to ensure End Buyers are capable of taking in vessels and releasing funds on time, to ensure deliveries are smoothly coordinated”.
Nikos Roussanoglou, Hellenic Shipping News Worldwide