Ship recycling market caught between a rock and a hard place

VSConditions in the ship recycling market have been quite challenging over the past week. In its latest weekly report, Best Oasis (www.best-oasis.com), a leading spot ship buyer, stated that “the ship recycling industry has faced a challenging landscape this week. In India, the market is experiencing a significant slowdown, with minimal demand and a shortage of ships, leading to a stall in new transactions and weakening international competitiveness. In Bangladesh, the market has seen a lack of demand, leading to a drop in local prices by Taka 500-1,000 (USD 5.85-11.70) with the potential for further declines next week, creating uncertainty over future trends. The Pakistani market has partially reopened, with initial signs of increasing demand and stable steel rates, and potential increases are expected as the market adjusts to the recently implemented budget.

Meanwhile, Turkish market conditions remain stable but lack momentum, with the industry anticipating increased tonnage to boost future activity and growth. The International Monetary Fund (IMF) has warned that U.S. government budget deficits and escalating debt pose “a growing risk” to the global economy, overshadowing otherwise strong economic performance. The IMF stressed the “urgent need” for the United States to reduce its debt burden in the coming years. This could require widespread income tax increases and cuts to popular social programs, according to the fund’s annual review of the U.S. economy. Global steel production rose 5.7% from April to May, reaching 165.1 million metric tons, according to the World Steel Association report. The growth also pushed the industry up 1.5% from the same period last year.

According to Best Oasis, “In India, the market is facing a persistent decline with little to no demand, and there is a notable shortage of available vessels; hence, no new vessel contracts have been entered into due to the current market situation. Indian buyers are struggling to compete internationally as the current downward trend has significantly impacted their competitiveness against their global counterparts. The market typically experiences lower demand during the monsoon season, in line with historical trends. However, the current market is highly unpredictable, making it difficult to rely on past trends to forecast demand. Indian steel exports are facing challenges due to China’s overcapacity and weak domestic demand, leading to a global market flooded with cheap steel. In May 2024, India’s steel exports fell by nearly 25% month-on-month.”

In a separate note this week, shipbroker Banchero Costa said that “while demand remains, the positive sentiment we saw in the Indian subcontinent markets earlier in the year has reversed course. Prices have corrected by around $20-30 LT/LDT in all three markets. This weaker sentiment is perhaps typical of the time of year, when monsoon rains dampen activity, but also partly due to lower local steel plate prices and deteriorating currencies. In Bangladesh, the Taka ended the week at levels above BDT117.55 against the US dollar. There is little to report in terms of interesting sales, an old 48,200 dwt Handymax bulker, the Kmax Pro (built 1997 / LDT 7226) which suffered fire damage, was auctioned as scrap by the Malaysian courts, on a Malaysian ‘as is’ basis, but a price has not yet been announced.
Nikos Roussanoglou, Hellenic Shipping News Worldwide