According to GMS’ latest report, the Indian sub-continent ship recycling destinations are currently experiencing a state of anxiety and uncertainty. This apprehension stems from a week characterized by volatile tariff announcements, suspensions, and what is perceived as mishandling of economic affairs, all contributing to fluctuating markets, reports Safety4sea.
Significant Downturn
Global stock markets experienced a significant downturn, declining by nearly 20% and losing over USD 11.2 trillion in value. This was followed by a partial recovery of approximately 10% in the days after the announcement of a 90-day suspension on tariffs for most countries globally. However, both the European Union and China responded to the initial tariffs by imposing counter-tariffs against the United States. This led to a continuation of the stock market decline, even after the US government partially reversed its tariff policy mid-week. The ongoing trade dispute with China shows no signs of easing, with China having imposed duties totaling about 125% so far, while the United States has levied counter-tariffs amounting to 145%.
Sources indicate that the shift in the US tariff policy followed a substantial sell-off of U.S. Treasury Bonds by the Japanese market, which reportedly caused concern within the US administration and contributed to the week’s fluctuating policy decisions.
For the ship recycling markets in the sub-continent, a crucial factor will be the impact of these trade developments on steel prices and the non-ferrous steel trade when recyclers eventually sell their materials. While the 90-day tariff suspension offers a temporary respite, the deadline is effectively only three months away.
In the interim, oil prices have been highly volatile, falling to USD 56 per barrel mid-week (the lowest level since 2020) before rebounding to USD 61.50 per barrel by the week’s end. Further declines in oil prices are anticipated as OPEC+ countries maintain their decision to increase production, despite the ongoing trade disputes increasing global economic uncertainty and potentially reducing energy demand.
Long Term Implications
The long-term implications of the current dip in shipbreaking rates are still uncertain, particularly as there has been a lack of new tonnage being offered for sale recently. This scarcity of available vessels is evident in the anchorages, with India reporting its first instance of technically having no ships waiting for breaking. In contrast, Pakistan has seen the highest intake of tonnage within the sub-continent. Turkey, meanwhile, remains in a state of standby, awaiting a favorable opportunity to become more active, contingent on the availability of vessels for breaking.
In Bangladesh, facilities that are scheduled to begin yard upgrades to meet the Hong Kong Convention (HKC) standards but have not yet done so may receive an extension to the March 31st deadline. This potential extension is anticipated to be announced next week, pending the nation’s return from an extended Eid holiday and the transfer of the necessary documentation from the Ministry of Industries to the newly established Ship Recycling Board, which will coordinate the extension.
With the original HKC deadline approaching on June 26th of this year, and the potential for the US government to revisit tariffs shortly thereafter, there is a sense that the relative stability of 2024 may be giving way to a more challenging period in 2025. This is particularly true if long-term tariffs are implemented or if a significant number of ship recycling yards fail to meet the HKC standards and are consequently forced to cease operations.
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Source: Safety4sea
