The balance of things appears to be fragile in the demolition market, as cash buyers, scrapyards and ship owners are tangled in a “wait-and-see” approach over the market’s future trends. Even so, some parts of the market are still very robust in terms of activity. According to the latest weekly report from Clarkson Platou Hellas, “the quiet start to the year has continued over the course of the past week, although we are now starting to see a glimpse of things to come where there have been several more vessels being talked around in the market, particularly larger tanker units such as VLCC‘s. Whether Owners are gaining market knowledge of what may be achieved or brokers vying for early commitments remains to be seen, but actual reported sales remains slow and just a small amount have actually been sold”.
Clarkson Platou Hellas added that “with question marks still remaining over recent rates achieved, perhaps the aggressiveness from Cash Buyers at present does have credible reasoning, especially as supply of dry bulk units in particular look to be slow as many analysts predict a bumper year in this sector on both freight and second-hand markets for the next year or so. This can only hope to keep rates at the impressive numbers being seen for dry units as we look ahead to the year and with further rumours circulating about the re-opening of Pakistan (no holding your breath….), only then could we possibly see premium numbers for tanker units possibly in parallel with cape rates, but as of now, some distance will remain between dry and tanker price levels”.
Meanwhile, GMS, the world’s leading cash buyer said that “the impressive performance of the Indian sub-continent ship-recycling sector witnessed over the recent past showed few signs of letting up this week, with local steel plate prices in both India and Bangladesh registering further gains whilst local fundamentals remain steady in Pakistan as Gadani Buyers continue to claw away at any available dry units. Of course, last week’s sale of the Capesize bulker ENTERPRISE at a mind blowing price bordering on USD 500/LDT (USD 495/LDT to be precise) has been the biggest recycling news over the last year or so. The sale expectedly caught a lot of industry players off guard, including end buyers from Pakistan, where the vessel will likely end up – and it does appear to be an extremely risky forward position taken by the concerned Cash Buyer. The same Buyer seems intent on driving up the market in order to justify some of the risky positions he has taken and continues to take, as proven by the sale of another large LDT FSU (ex VLCC) this week, making it the third large LDT wet unit sale of 2018 already. Many more are set to be introduced to the recycling market in the weeks / months ahead, as the tanker sector continues to struggle.
However, despite the firm prices, it was a surprisingly quieter week in terms of activity on the sales board, probably because several ship owners are now actively pursuing a price close to or even in excess of USD 500/LDT – a number which frankly does not exist from a realistic view, given today’s market fundamentals. It may be that certain owners get lucky with Cash Buyers willing to speculate on available tonnage (particularly on dry units for Pakistan) well ahead of the market, anticipating further price gains ahead. However, we urge Owners to recognize that the market is already trading at phenomenal levels (at three year highs) and has gained over USD 100/LDT of late, in order to reach this point. As such, a few declines are to be expected at some point in the near future, as most end Buyers are now operating above their breakeven costs once again”, GMS concluded in its weekly report.
Finally, in a separate note, Allied Shipbroking said that it was “another interesting week for the demolition market, with things remaining firm both in terms of prices and activity noted. At this point, the Indian Sub-Continent is the main driving force, with ample buying appetite being seen especially from Indian breakers. With the overall price gap being fairly tight in the region, Bangladeshi and Pakistani seem to still be competing fairly well, despite the relatively softer volume they have been noting compared to a couple of months back.
It is important to note that this level of activity has been noted despite the lack of demo candidates being offered from the Dry bulk sector, with the tanker sector stepping up to fill the gap fairly well. This is obviously reflecting the prolonged bearish mode in the tanker sector, where in the face of the low earnings being noted now, combined at the same time with the high numbers offered by cash buyers, incentivizing many owners to take up the option. The big question mark now is whether these bullish price levels being seen in the ship recycling market can be sustained and even boosted further over the coming months, with a lot dependent on the continued firm demand for steel plates holding”, the shipbroker concluded.
Source: Hellenic Shipping News.