Market commentary
Better days!
The ongoing complications experienced in the Indian sub-continent ship recycling markets have shown few signs of dissipating this week, with a sudden increase in the unrelenting non-existent supply of vessels and sparse L/C / financing approvals in Bangladesh and Pakistan, which has seen market pricing that is reaching new lows with each concurrent sale into the subcontinent destinations.
Notwithstanding, despite being moderately placed in the market rankings, India remains a beacon of hope amidst a dire 2023 recycling landscape, especially as a number of impressive deals were concluded here this week, perhaps suggesting that better days may well lie ahead for this market.
It is also reaching a point where various Owners and Cash Buyers are choosing to hold on to their unsold tonnage, rather than committing their units at these unexpected new lows of today that are consistently below USD 500/LT LDT – so unexpected have been the level of falls from over USD 600/LT LDT seen earlier this year.
As such, only after various Cash Buyers have disposed of their inventory and a period of calm and stability has been witnessed across the sub-continent markets, may we start to look upwards, especially after all these months of negativity. Particularly, once the constant rains come to a halt, may we see production restart and the backlog of material at the yards starts to shift again.On the far-end, Turkey remains quiet as ever, with virtually no movement reported over recent weeks.
Overall, following the glut of dry bulk sales over the summer months, it has overall been an odd mix in the supply of vessels as container units have started to re-emerge once again, especially as rates across these two sectors struggle to post any significant profit above running costs. As such, if prices do begin to pick up from these current lows and financing / LC issues start to ease up in both Pakistan and Bangladesh, we may hopefully expect a busier fourth quarter, in addition to some more urgency / aggression to the present lethargy being witnessed.
BANGLADESH
BUSY-CALM!
After a frantic month passed, with Cash Buyers dumping various vessels (mostly from Chinese owners) into the recycling markets at ever decreasing prices, a relatively unexpected period of a busy-calm appears to have descended across the ship-recycling sector in Chattogram.Many of the Local Buyers with ready and capable L/Cs are likely unavailable anymore,as units have been concluded (and even beached locally) to these Buyers as evidenced by Bangladesh’s port position this week.
Accordingly, it is expected to be a waiting game to see when and where business resumes post-monsoon, before the steel plate starts to shift again.Some of the levels being quoted by various End Buyers are certainly well below current market offerings, and it would not be a surprise to see tonnage head to competing shores as a result of, especially towards a far more capable (in financial terms) Indian market,where L/Cs have not been an issue. Certainly, larger LDT units approaching 20K LDT (Capes and Panamax containers) have been struggling to get bank / L/C approvals prior to heading towards Bangladeshi shores,as the last Capesize Bulker proposed here recently went to a far more solvent Indian market where levels remain below USD 500/LT LDT for such a unit.
On the local fundamentals front, after breaching a record BDT 109.40 against the U.S. Dollar this week, the Taka relaxed back closer to BDT 109 levels as local steel plate prices continue to flatline amidst this unexpectedly busy phase.Certainly a confusing end to the Monsoon month in Bangladesh.
INDIA
LIFT OFF!
This week, India became the first country to land a spacecraft at the south pole of the moon as the Chandrayaan-3 lunar rover made history for our humanity, creating euphoric and celebratory scenes across the world.Meanwhile, the ship recycling community in Alang seemed to be cashing in on thee euphoria as several sales at seemingly unthinkable levels were committed for an India redelivery.
Firstly, bulk carrier GLORIA 1 (11,259 LDT) was fixed for a decent USD 517/LT LDT (although there could be a Pakistan or Bangladesh option in this deal if buyers with L/Cand financing abilities can be located there).Subsequently, two standard Japanese built Laskarides owned reefers, the FRIO OLYMPIC (4,698 LDT with 161 Tons of cement permanent ballast to be deducted) and the ZEFYROS REEFER (4,731 LDT) were both committed on an en bloc basis for a firm USD 510/LT LDTto one particularly frisky Buyer who is perhaps banking on a firmer resale in the near future.Fundamentals, however, as shaky as they have been, suggest they may undermine this move as even though the Rupee firmed from over Rs. 83.X to Rs. 82.5X as the week ended, the volatility of local steel plate prices represents the ongoing unpredictably and vessel pricing in this market, especially as the monsoons remain in full swing.The only silver-lining remains the possibility of the markets firming in Q4 (based on historical performances) and levels continue to float in the USD 500/Ton range.
Pakistan
BUYERS BOOKED!
As far as good news goes and after almost a year on the sidelines, not one but two L/Cs have reportedly been approved into Gadani, as the Pakistani ship recycling sector seeks to get back on its feet.The economic, financial, and political instability that has besieged the country in an unexpected three-prong attack over the course of last year, has led to a whipping pause in ship recycling activities, as the Pakistani Rupee depreciated alarmingly on a daily basis, wiping out much of its value in the process.
In fact, despite all of the financial aid packages (in the billions) being provided to the country, seems to have whittled away as the Pakistani Rupee plunge briefly past PKR 300, only to settle pennies shy of as the week ended. Local steel plate prices too remain dead as a doornail, having flatlined for much of the year.Notwithstanding, recycling activity appears to be slowly resuming and the first few L/Cs have been approved and financially executed, hopefully more will follow as demand has been building steadily in the country, especially as not a single vessel has been beached into Gadani since January.
Turkey
SILENCE!
After collapsing and sailing through much of the week at levels over TRY 27.20 against the U.S. Dollar, the Lira stabilized to TRY 26.51 as the week ended, leaving the market in the same state it found itself in. Puzzled and silent.Reportedly, the government has increased interest rates by a whopping 7.5% (up to 25%),which has in turn, firmed the Lira by said amount. We can only hope that this action brings pricing and stability back to this market that needs it the most – especially for EUSRR based recycling.Meanwhile, there is no change reported in local steel plate prices as Aliaga suffers through the absence of tonnage, during this most abysmal period for this sector.
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Source : capital link
