Ships’ Demolition Market Picks Up Pace



With oversupply a decisive factor in determining freight rates, the demolition market for older vessels is proving to be a major factor towards the future prospects of the shipping industry.  According to the latest report from the world’s leading cash buyer of older vessels, GMS, “this week, the Indian market finally started to display some signs of life as local steel plate prices saw nearly a whole week of gains (of about USD 10/LDT) and the country gradually recovers from the ongoing cash crisis, in the wake of the crackdown on black market money.  Despite some heavy lobbying by end buyers and a series of different meetings held with government officials and lawmakers, Pakistan remained officially closed for yet another week”.

GMS said that “there are certainly going to be safety improvements mandated for local yards in Pakistan and human rights officials have been visiting Gadani this past week, to evaluate, recommend, and monitor the improvements being made.  For the time being, there is a total halt to all cutting activities and due to this, an artificial shortage of raw material available to the domestic steel mills has seen prices and demand rise sharply.  Unfortunately, banks are now starting to clamp down on issuing new LCs as a shutdown in recycling activities has left local recyclers unable to make payments on their previous loans – a worrying situation that is starting to unfold locally.  This has left Bangladesh as the only viable market over the last few weeks and end buyers there have started to wake up to this new reality, taking in several of the larger LDT units this week, including one more capesize bulker.  Another interesting facet to the market as we enter the last month of the year has been the remergence of China as a viable competitor to the Indian sub-continent once again.  Levels are about USD 50/LDT away from India at present, as China becomes a potential market, not only for smaller LDT vessels positioned in the area, but also for green candidates” the report concluded.

Meanwhile, according to shipbroker Allied Shipbroking, “prices were still under pressure this week, with the number of demo candidates emerging in the market increasing considerably and activity in turn being slightly increased compared to what we have been seeing in previous weeks over the course of the past couple of months.  At the same time there is an expectation that we may well see some further increased activity here over the next couple of weeks, partly due to the increased number of containership units that have been sent to be beached due to the difficulties being faced in their freight market, while at the same time we are likely to see some older units being scrapped in the dry bulk and tanker sectors, mainly being influenced by pressure from upcoming regulations that are coming into force soon”.

In a separate note, shipbroker Intermodal noted that “with the Pakistani market still remaining closed and with Indian breakers trying to reassess their strategy following the recent cash crisis, Bangladesh pretty much monopolized all action that took place in the Indian subcontinent demolition market last week, but we do not expect this to be the case for much longer.  On the one hand, despite the shutting down of all operations, cash buyers in Pakistan seem to still maintain their appetite, with rumors of quite a few sales currently being negotiated and at the same time fundamentals in India also appear to be improving as local steel prices start to finally point up.  Additionally, despite the overall lack of specific price details, the Chinese market seems to also be steadily strengthening recently, which means that as we are approaching towards the end of this year competition might intensify and eventually support prices.  Average prices this week for tankers were at around 215-305 $/ldt and dry bulk units received about 205-285 $/ldt.”

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Source: GMS


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