The global ship recycling market has seen recent declines, affecting market leader India along with Bangladesh and Pakistan, reports one of the leading cash buyers of obsolete ships GMS. Despite unexpected shortages curbing further downfall, an overall weakened state persists. Vintage asset supplies also remain low due to increased freight rates. Prices are generally down and market stability remains uncertain.
After several weeks of decline in the global ship recycling market, India has finally joined Bangladesh and Pakistan in experiencing lower vessel prices. Specifically, prices have fallen by about $20 per Light Displacement Tonnage (LDT). Meanwhile, both Bangladesh and Pakistan continue to face difficulties in securing the necessary financing to establish Letters of Credit (L/Cs).
In an unexpected development, the scarcity of suitable ships for recycling may have inadvertently slowed the degradation of market sentiments. Cash Buyers holding on to available units could increasingly encounter offers that make some of their recent sales more challenging to manage.
An increase in Container and Dry Bulk freight rates in recent months has kept older ships away from recycling centers. However, as we look toward 2024, it's expected that recycling activity will pick up, especially in the sub-continent destinations which include India, Bangladesh, and Pakistan.
In Alang, India, stakeholders anticipate that upcoming sales will likely reflect the current market correction, happening at lower rates. Recyclers are thus in a "wait and watch" mode, closely observing market trends before making any new firm offers on available tonnage.
The Turkish market is not doing much better; it remains in a weakened state. Basic fundamentals are disconnected from market sentiments, and a shortage of available tonnage is threatening the sustainability of local businesses.
Addressing economic and financial issues is crucial, especially for Bangladesh and Pakistan. Despite the market not declining as sharply as feared, the availability of firm offers could still be a challenge in the coming weeks.
Week 43 of 2023 recorded the following prices per LDT in the major markets: India reported $515 for Dry Bulk, $535 for Tankers, and $555 for Containers. Bangladesh had $505, $525, and $545, respectively, while Pakistan had $500, $520, and $540. Turkey lagged behind with $290, $300, and $310 in the respective categories.
The global ship recycling market is going through a turbulent phase, reflected in declining prices and weak sentiments across key players like India, Bangladesh, and Pakistan. Despite small rays of hope, such as unexpected shortages preventing further declines, the industry faces numerous challenges ahead. Market stability seems elusive at the moment.