Ship demolition prices tumble, while few bulkers become available

Ship owners are advised to take advantage of the current demolition market, despite the recent fall in rates. Shipbrokers and cash buyers alike are noting that the current rates offer a solid platform to complete such business and the recent price resistance against more increases, shouldn’t be seen as a deterrent. However, few owners are looking to sell the older bulkers in today’s freight market, which offers increased chartering opportunities, which most are looking to exploit.

In its weekly analysis, shipbroker Clarkson Platou Hellas said that “unfortunately this week has seen the inevitable happen. There has been some concern emanating from the waterfront in relation to the firming rates recently witnessed and with the global steel markets having taken a fall, the negative sentiment filtered through to the ship recycling market this week as buyers started to talk the market down with offers on the table seemingly having traded southwards fairly rapidly. However the opinion amongst many is that this could be just a temporary correction as there still remains a general lack of tonnage and thus potential demand should turn things around again in a few weeks’ time. Concerning the supply, with the second hand and freight markets in the dry cargo sector continuing to provide rewarding levels and upbeat optimism, the inclination is that few Owners will look to the recycling market in the current climate and therefore, the recyclers may need to brace themselves for fewer such units. Staying on the dry side, we could once again see more container units enter into the market with a number of Panamaxes due to come off charters which were fixed during the March/April rate spike. Therefore Owners may switch their attention back to the recycling industry rather than risk sitting idle or fixing a poor rate charter. Generally a quiet week materialised this week, most probably due to the uncertainty that is evident, so next week will be interesting to see if some form of normality can return”.

The world’s leading cash buyer, GMS, said in this week’s report, that “as September draws to an end after the recent remarkable rally in prices, all sub-continent locations are now displaying an increasing resistance to the firming levels and except Pakistan (to an extent), both Bangladeshi and (especially) Indian end-buyers are starting to reverse their prices. Overall, levels are about + / – USD 400/LDT in the leading markets, as Cash Buyers continue their optimistic offerings on the various units being proposed. Notwithstanding, even with the marginally weaker levels, the present remains a good time for Owners to sell their units for recycling, given the extent to which rates have risen to over these summer months. On the flip side, the firming dry index has left many dry vessel Owners keen to exploit the improving freight rates and this has lead to the ongoing shortage of units that has been felt most acutely in Pakistan, as this market remains closed for tankers”.

In its own report on the demo market, Allied Shipbroking said that “after a prolonged period of very firm flow of recycling candidates, things have started to slow down substantially, with very few demo sales being seen this past week as prices showed a sharp correction. In the India sub-continent, from where the largest portion of the uptrend in prices was mostly driven by, Bangladeshi buyers are now showing stability in terms of volume and a slight drop in offered prices. They still outperform both Pakistani and Indian buyers in terms of volume, despite the fact that the former still outperforms in terms of offered prices. The overall sentiment is that we are in a declining mode, a development that was somehow anticipated from most market participants as there was little, beyond the sharp rise in steel plate prices, to support the previous sharp hike in scrap prices. With the steel market now having shown signs of cooling down, the loss of support was quick to be noted in this market, with most cash buyers quick to react to the new market reality. Yet, any potential shift in the dynamics and trends of the market is not so clear cut. We may well see some further corrections in sight over the coming weeks, though it seems that this is more so a short term trend and not reflective of the overall long-term fundamentals held by the market”, Allied Shipbroking concluded.