Ship Recycling Fundamentals Remain Shaky
As inflation starts to slowly ramp up across the world, the US is gradually heading for a recession as the American economy shrank through Q1, reports cash buyer GMS, and the U.S. Dollar has weakened against some recycling nation currencies.
The Baltic Exchange Dry Index reported increases this week as trade starts to shift around the world and global economies hash out fresh trade agreements without the United States, causing freight rates to report minor improvements this week even though overall trading activity seems to be far lower.
“Notwithstanding, the biggest hammer of them all fell on the price of oil where on the back of plummeting energy demands and inconsistent policies and announcements of potential sanctions amidst Russian aggression against Ukraine saw futures plummet by 1.6% down to USD 58.29/barrel,” says GMS.
“Local steel plate prices also seem to be taking quite a hit as flatlining seems to be theme of the week across most sub-continent ship recycling markets and even China, where steel trade seems to have certainly taken a hit causing steel prices to freeze.”
A shaky last few weeks finally settled this week with news that NOCs (No Objection Certificates) on incoming vessels in Bangladesh were finally being granted after a month-long hiatus whilst inspections from various government departments were being conducted to ensure that ongoing Hong Kong Convention yard upgrades reported by recyclers were on track.
Aside from the seven Hong Kong Convention yards now approved in Chattogram, there is a list of about 20 yards waiting to gain accreditation, and these yards are reportedly at disproportionate stages of their own upgrades. This pushed the market into a state of stasis whilst ongoing inspections and approvals worked themselves out, resulting in minimal sales and deliveries into Bangladesh of late, as a descending lull on activity shifted focus of ship owners / cash buyers on to competing markets in Pakistan and India.
Political tensions are now on the rise between Pakistan and India on the back of a terrorist attack in Kashmir’s Pahalgam city that resulted in the death of 26 people.
“Overall, as tonnage scarcities and shaky fundamentals result in ship recycling activity being dragged through a bumbling backseat across sub-continent backroads for another week, particularly as global markets struggle to recover (and negotiate) following the sharp shock of the Trump’s tariff reforms, this is keeping shipping markets propped up depriving recyclers of viable candidates for another week.
“Prices and demand, however, remain relatively unchanged from last week, other than a heightened sense of caution amongst ship recyclers who are still on the lookout for tonnage.”
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