In Hellenic Shipping News 01/12/2016
Ship owners are being forced to look to alternative locations when it comes to scrapping their older vessels, as the Indian sub-continent’s ship-recycling sector is faced with various challenges. For starters, India counts the cost of the crackdown on black market money and Pakistan remains officially closed after the worst accident recorded. As such, according to GMS’ latest weekly report, “the selective Bangladeshi market has been left as the only open and (not entirely) viable recycling destination at present”.
According to the world’s leading ship buyer, “as we hurtle towards the end of the year, the number of available candidates shows no signs of slowing, particularly Panamax-sized container vessels that seem to get progressively younger with each deal. As such, the world witnessed the sale of a 7 year old ship this week, as the 2009 built (in China) India Rickmers was reportedly out on subs to cash buyers’ basis an ‘as is’ Jebel Ali delivery. It wouldn’t be unexpected to see a record number of containers being sold for recycling this year and it was only 6 months ago that the industry was discussing the possibility of a record year for dry bulk scrapping. However, a recent recovery in dry rates has seen the number of Capesize and Panamax bulkers sold for recycling almost grind to a halt, save for a small collection of units with SS/DD due imminently, whose owners chose not to pass surveys! While the number of capes sold for recycling will probably struggle to hit the 100 mark (or even match the 96 that were sold for scrap last year), the number of containers could likely exceed 150, in a massive rebalancing for this particularly troubled sector. Finally, despite the ongoing meetings and inspections in Pakistan, the market remains officially closed and end buyers are not permitted to commence cutting activities of any vessels on their plots since the accident. Even though some sales have taken place since, until the concerned authorities issue an official green light to resume cutting activities once again, it remains a waiting game for Gadani recyclers for the time-being”, GMS concluded.
Meanwhile, in a separate report from shipbroker Allied Shipbroking, “there was some downward pressure noted this past week with prices dropping slightly as we are still seeing the ripple effects from the accident noted in early November in Pakistan. Inspectors have been auditing operations of several breakers this week in order to ascertain if standards are kept and preventions against similar accident occurring in the future are in place. Despite this there is still a sense and an opinion shared by most that we are likely to see another price surge fairly soon. The prime reasons for this are attributed to the major switch of many local steel producers from blast furnaces to arc furnaces, something that will drive the demand for scrap steel as arc furnaces have much larger requirements for such feedstock. At the same time we are still seeing relatively few demo candidates in the market and as such we have higher pressure on cash buyers to keep prices up in order to upkeep sellers interest. All this does also leave the likelihood for an increase in speculation to start emerging in the market again, though this will depend on a lot of short term factors”.
Similarly, shipbroker Intermodal said that “if it weren’t for the historical low earnings dry markets witnessed this year, we very much doubt that the demolition market would have seen so much activity. The past few weeks are a representative example of this. Indeed, with the cease of cutting operations in Pakistan, the hit in Indian demand following the cash crunch, the relatively subdued appetite from Bangladeshi breakers and those demo prices that are still at lows levels compared to the past years,, the only thing literally keeping the market alive has been the determination of certain owners to scrap no matter what. A determination very much evidenced by the sale of the seven year old Panamax container “INDIA RICKMERS”, which has stressed in the most obvious way the dire straits the sector is currently in. With supply of demo candidates remaining overwhelming and Indian subcontinent breakers lacking appetite, it is hard to see why prices could move higher in the weeks leading to the end of the year, while the firming of the Chinese market is currently one of the few signs of price support in the market during this time”, Intermodal concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide
