2018 has started in relatively “slow mode” when it comes to the ever so crucial demolition activity, across all segments. While things in the dry bulk market are rosier than before, as a result of the freight market rally since the second half of 2017, they could very well turn sour, if scrapping dwindle down. From the opposite scale, the tanker market is looking for more scrapping if it’s to rebound from its low level.
In its latest weekly report, shipbroker Clarkson Platou Hellas noted that “a false impression has certainly been created in the market this month. Firstly, the increased rates seen from the beginning of the year was pure ‘over-speculation’ and secondly, the intense chatter, gossip, rumours of many large tanker units for sale, have created a false dawn and actually, we remain in a relatively quiet market. Recent sales that were reported certainly surprised many within the industry and it would appear those cash buyers are now struggling to resale and of their inventories. What we have witnessed over this week is price levels having a natural correction back to where we were at the prior to this enthusiastic speculation and subsequently, this proves that the domestic markets remain stable and that there has been no real correction downwards from the yards. It does seem to suggest that the issue is that some cash buyers had escalated prices in the anticipation of increased prices locally which now seems to have been a misreading of the market and could prove to be costly to them”.
Clarkson Platou Hellas added that “from the waterfront (recycling yards), demand for finished products is ‘ok’, but not great, mainly due to a slowdown in production such as construction of buildings and the uses of steel bars etc. However, demand remains steady and thus a stable market pricewise should ensue now that rates have returned to a more realistic level in comparison to the numbers from the waterfront. Meantime, it is encouraging to report that the incentive for Green Ship Recycling continues to gather pace with Bangladesh set to follow in the footsteps of their counterparts in India. Reports from Bangladesh suggest that Parliament has passed a ‘Bangladesh Ship Recycling Bill, 2018’ setting out certain regulations and laws to ensure that all recycling yards in Chittagong would have to abide by the relevant international laws and conventions and that serious consequences would occur for any ship recycler not adhering to this new bill. One interesting aspect is that the proposed law states the government would set up proper facilities within three years for the treatment, storage, and disposal of the hazardous materials produced from the recycling of ships”, the shipbroker concluded.
Meanwhile, in a separate note, the world’s leading cash buyer, GMS, said that “a few (perhaps overdue) signs of a market softening started to emerge from the various subcontinent locations this week, as end buyers made it unequivocally clear that they are unwilling to pay the borderline insane above-market prices for several of the vessels that are presently being offered by various Cash Buyers from their recent speculative purchases. Cementing their (sub-continent recyclers) attitude were local steel plate prices that suffered notable declines in India, Bangladesh and even Turkey, while demand for steel bars in Pakistan also weakened, due to an order issued by the Supreme Court of Pakistan that halted high-rise construction in the country. As such, after a stunning start to the year, prices and sentiment have started to cool off this week.
In the years gone by, Chinese New Year holidays also brought with them a degree of cooling and the same seems to hold true for the Chinese market this year as well. The onset of this softening may tragically affect some of those high priced VLCC sales seen over previous weeks, as only a handful of capable (in terms of LC financing) Bangladeshi buyers are available to negotiate such large LDT / large Dollar value deals. India was closed for large parts of the week, celebrating its 69th Republic Day and Alang Buyers consequently missed out on a few choice units, which will likely end up in Bangladeshi hands. It has also been confirmed that the capesize bulker ENTERPRISE, which surprisingly fetched close to USD 500/LDT several weeks ago, has been committed into a far softer Pakistan market, at levels about USD 20/Ton below the vessel’s breakeven price. An undoubtedly and expectedly wrong call by the concerned Cash Buyer and an unnecessarily speculative play, given how the market has categorically shown itself to be MUCH lower than some of the prices being tabled by curiously bullish Cash Buyers” GMS concluded.
Source: Hellenic Shipping News.