Ship Demolition Market Hits Standstill, While Shipping Needs More Scrapping To Recover

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While all shipping markets are eagerly awaiting for more ship scrapping activity moving forward, in order to be able to alleviate the tonnage oversupply and stage a viable and sustainable recovery, things don’t seem to be able to move that way. In its latest weekly report, the world’s leading cash buyer of ships, GMS, said that “negotiations, fixtures and overall local activity ground to a virtual standstill this week with most end buyers focusing their attention on the budgets of Pakistan and Bangladesh, before deciding on whether to / what to offer on future tonnage”.

According to GMS, “the general expectation, based on the prevailing rumors, is that prices will likely soften depending on the outcome of the budgets. This expectation remains bolstered by the advent of the monsoon / summer season, which has historically been a quieter period in the sub-continent recycling markets. However, there has been an omnipresent demand persisting from most recycling locations, where many end buyers who had purchased vessels at the peak of the market, remain keen to even out some of those high-priced fixtures, with new ones at the current (lower) levels.

Meanwhile, it has become a tricky time at the waterfront for owners who failed to secure first class counterparties on their fixtures as news of several renegotiations and frivolous money— reducing games plague the industry once again. Additionally, the commencement of the Holy month of Ramadan will result in reduced working hours in addition to a reduction in appetite / aggression to acquire new units. Consequently, it was unsurprising to see no new sales recorded into any market for the week and there has been a noticeable slowdown of activity into all recycling locations (except Turkey) over the past month – perhaps predictably coinciding with the nearly USD 50/LT drop in prices. As such, it has been a sharp reversal in levels for the industry and is something that has caught many of the industry players (ship owners, cash buyers, and ship recyclers) off guard, despite the customary pre-budget / pre-monsoon / pre-Ramadan purchasing heat that most expected would sustain the markets until the end of second quarter of the year”, GMS concluded.

In a separate report, Allied Shipbroking said that “there is still somewhat negative pressure to be seen here, with most of the Indian Sub-Continent reverting their interest further and activity seemingly starting to trend towards its seasonal slow down, unwinding some of the excess competition that was being noted in the early part of the year. As such and with local steel prices retreating further there was still an overall lack of support for cash buyers to act more aggressively. At the same time it seems as though both Pakistan and Bangladesh have already started to retreat from any firm bidding on the few candidates that do come to market. At the same time the lack in fresh candidates continues to help keep things buoyant rather then leaving for a complete collapse in prices offered. The still comparably favorable earnings being seen in the dry bulk and tanker markets and the recent drop in scrap values has continued to push owners to seek other opportunities rather then taking up the beaching option for their older tonnage just yet. With things likely to slowdown further in terms of activity over the coming days and commodity prices looking to likely soften further, expectations are for further price drops to be in sight over the next couple of days”, Allied mentioned.

In a final note this week, Clarkson Platou Hellas said that “following the Pakistan budget announcement and the results it will have in prices offered, Bangladesh are set to announce their own budget in the first week in June and therefore the uncertainty in the market looks set to remain for the forthcoming weeks, particularly as Ramadan is due to commence and with a distinct lack of tonnage being made available and growing concern over the global steel markets, the lull in the market seen looks set to continue for the foreseeable future”, the shipbroker concluded.

Source: 
Hellenic Shipping News
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