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Demolition Market Could Be Set for A Rebound in Demand

Friday, 08 February 2019 | 00:00

The first month of 2019 was lucklustre for the ships’ demolition market, to say the least. As such, the latest news from the Southeast Asia region seems to be positive in terms of market sentiment. In its latest weekly report, shipbroker Clarkson Platou Hellas said that “the sign of the current market conditions appears clearer to see as cash buyers start to offload some of the units that they have held in their possession for some time which probably is a good indicator as to where their confidence lies. There are also more newly available units being talked around which will certainly not help price indications from the Buyers but, let's try to place some positive semblance into the arena. This week has seen a slight improvement in buyer's minds when discussing trading conditions and perhaps we may witness a slight relief from the negative sentiment experienced so far this year. This may just, however, be a temporary recovery as we expect to see more supply of dry and container units circulated on the back of weakening rates. Whilst the tragedy surrounding the Vale dam collapse may push the value of iron ore and subsequent steel markets up sharply for the short term, the steel markets in the Indian sub. Continent look set to avoid any such dramatic changes”, said the shipbroker.

It added that “the fundamentals in both Pakistan and India clearly show that they remain uncompetitive with their counterparts in Bangladesh and with the latter filling up their recycling yards, any recovery in sentiment may be short-lived. Looking towards the European shores, one piece of breaking news that should be highlighted that this week saw Turkey formally ratified and become a party the IMO Hong Kong Convention. This marks the first major ship recycling country to ratify the Convention, coinciding with the 10-year anniversary from the adoption of the text of the convention in Hong Kong in 2009. The instrument of ratification was deposited to the IMO by the Ambassador and Permanent Representative of Turkey to IMO, Mr. Umit Yalcin. Other contracting States that have already ratified the Hong Kong Convention are Belgium, Congo, Denmark, France, Norway and Panama, but Turkey is the first major ship recycling nation to do so. Turkey, along with India, continues to be at the forefront regarding green ship recycling, with the first two non-European yards to be accepted on the EU List coming from Turkey (Leyal ship recycling yard). Now exactly one month later, Turkey has reiterated its commitment to safe and environmentally sound ship recycling in a formal manner by ratifying and becoming a party to the IMO Hong Kong Convention. This is a very impressive step taken. Finally, and surprisingly, at a recycling conference held this week in Amsterdam, the indications were that the two Indian HK Convention compliant recycling yards recently vetted by the EU authorities will not obtain their approval, but the outcome is still to be announced. Not good news for the local industry if this is confirmed”, Clarkson Platou Hellas concluded.

In a separate note, Allied Shipbroking said this week that “demolition activity remained soft in both the dry bulk and tanker sectors last week, with most of interest amongst cash buyers' being focused on the containership segment. On the dry bulk side, there was only one deal reported last week, the sale of a 25-year-old Capesize which went ot Bangladeshi buyers. Given, though, the current situation in the sector, it is likely that we will see some rise in activity here over the coming months. On the tankers side, things remained quiet as of late, with owners being reluctant to proceed with any decision to retire any tonnage right now, given that expectations are for rates to move at satisfactory levels for most of the year. Bangladesh continues to hold top spot in terms of activity and offered prices, given that both India and Pakistan seem to have back tracked their interest partly due to the uncertainty noted once again in the Indian Rupee and the drop in local steel prices. In the case of Pakistan, activity remains very slow, however sentiment seems to have been slightly improved lately”.

Finally, GMS, the world’s leading cash buyer added in its latest weekly report that “the week before Chinese New Year has finally brought some semblance of stability, to a ship recycling market that seemed to be in freefall over the previous month. Indeed, most Cash Buyers have been struggling to offload their existing overpriced inventories at anywhere near sensible / breakeven levels, resulting in something of a panic as a majority of these vessels are now headed to the only bullish market (Bangladesh), in the hopes of salvaging whatever little could be financially scraped out of a deal. Pakistan remains painfully subdued on the sidelines, despite the announcement of the mini budget last week that brought with it, little material change to the domestic steel and ship recycling sectors. India too remains mostly absent from the buying as local steel plate prices continue their weekly volatile dance, leaving most end Buyers in a conservative state, intent on securing bargain green or offshore units below the USD 400/LDT mark. If news on the ground holds true, they may have certainly been snagging their share of late. And so on to Bangladesh the focus remains, where local port report shows a multitude of vessels arriving by the week and the number of capable (in terms of ready and available LCs) and keen end Buyers remain few and far between. As local capacity continues to gradually dwindle, those Cash Buyers with expensive inventories will be left holding a rather heavy bag. Moreover, once the appetite in Bangladesh starts to shrink, we can certainly expect prices to fall in line with the much reduced Indian and Pakistani markets i.e. somewhere in the low USD 400s/LDT (and perhaps lower on certain sized / types of vessels). Finally, the onset of Chinese New Year holidays next week will see activity (particularly from the Far East) and supply start to cool off”, GMS concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide

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