In a report by GMS, the ship recycling markets have been in a state of “confusing fundamentals” due to several international events. This has led to bizarre reactions in various markets and a decline in recycling prices.
Market Volatility and Geopolitical Tensions
The report indicates that a combination of factors, including new “Liberation Day” tariffs on key destinations like India, is causing uncertainty. Oil futures dropped by 5% as traders reacted to the tariffs, which surprisingly included Russia and China, and concerns over a potential meeting between Trump and Putin. Simultaneously, the Baltic Exchange’s dry index saw a more than 2% increase, providing a glimmer of optimism for owners of older ships. The U.S. Dollar’s value also fluctuated, strengthening against some currencies and weakening against others.
Challenges in the Ship Recycling Industry
The recycling markets themselves are facing several issues. Prices have been turbulent, declining by at least USD 60/LDT since the start of the year due to ongoing tariff dramas and sanction threats. The industry is also grappling with the new realities of the Hong Kong Convention (HKC), which is now a “compelling force” in the Indian sub-continent. This convention requires additional documentation and inward formalities, creating a difficult adjustment period for recyclers. Furthermore, heavy monsoons in key locations like Bangladesh have hampered operations.
Shortage of Ships and Varying Compliance
There is a reported shortage of vessels available for recycling, leading to a state of “virtual stasis” in the industry. This shortage, coupled with the new HKC regulations, has created a situation where only certain yards are able to participate in the market. While Bangladesh and India are making progress on yard upgrades to become HKC compliant, Pakistan is lagging behind, with none of its yards currently compliant. This means Pakistani recyclers are being left out of bidding opportunities. The report notes that a vessel was reportedly arrested in Alang, India, adding to the sanctions drama.
The overall fate of over 1,000 ships and the entire recycling industry is said to be hanging in the balance, awaiting the outcome of the Trump-Putin meeting. Despite the challenges, demand for recycling remains in India, and some buyers are still active in Bangladesh and Pakistan. Turkey, however, is described as “dead as ever.”
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Source: Safety4sea
