Recycling Market Increasingly Precarious

Ship recycling market economies face an increasingly precariously future, reports cash buyer GMS.

“While the Baltic Exchange Dry Index reported gains once again this week on the back of virtually all inclusive sub-sectors reporting improvements of their own through the week, oil futures on the other hand seem to be taking a beating after levels clocked the week out at USD 59.50/barrel after Ukraine successfully carried out a massive drone attack against Russia’s largest oil refinery located at Novorossiysk. The U.S. Dollar meanwhile continues its carnage across the globe as it firmed at nearly all locations across the board while local steel plate prices in the two steady recycling destinations retreated in varying degrees.

“This double gut-punch targeted at the purchasing prowess of the ship recycling fraternity has driven demand and vessel offerings even further down this week as vintage tonnage starts to unexpectedly arrive at anchorages i.e. Bangladesh, which healthily beat India’s beaching quota for this week.”

With freight rates continually rising / yielding profitable results for relevant stakeholders, recycling sales have been slow for the most part of the year even though sales activity has comparatively picked up a touch since the barren summer slump, says GMS. Worse yet, many of the transactions concluded are at levels far below expectations and in the low USD 400s/LDT, with several reportedly in the high USD 300s/LDT on less preferred / small LDT tonnage.

“Meanwhile, the poorer placed India and Pakistan continue struggling to register any worthwhile levels for owners / cash buyers despite the supply of older dry bulk units – particularly vintage handymax and panamax units including small -to medium- sized-tankers – registering an increase in the number of candidates being proposed for recycling. Yet, just how many are actually being concluded amidst a sea of boring offers remains inconclusive even though several end-of-life MR tankers, smaller product tankers, and a steady stream of occasional LNGs have kept ship recycling markets from dozing off completely in the latter part of this year.”