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Positive Vibes Ahead: Ship Recycling Activity Poised for Improvement

Positive Vibes Ahead: Ship Recycling Activity Poised for Improvement

Positive Vibes Ahead: Ship Recycling Activity Poised for Improvement

The ship recycling market, despite its current challenges, is showing signs of improvement and garnering positive sentiment as we approach the end of the year and the beginning of 2024. Recent reports from key players in the industry indicate a fluctuating market influenced by various factors, including domestic steel prices, local demand, global steel plate trends, and currency reserves.

In India, the ship recycling market has experienced a decline in prices, with indications reducing by approximately USD 20-30/ldt due to falling domestic steel prices. The market is expected to remain subdued until after the Diwali festivities on November 12th. However, the lack of available tonnage may prevent further drastic reductions in price levels, providing a glimmer of hope for recyclers.

Green Recycling and Regulatory Fog: Charting the Course for Ship Recycling’s Future

Similarly, the ship recycling market in Bangladesh is struggling due to poor local demand and other challenges such as a lack of confidence in general business, upcoming national elections, and a shortfall of currency reserves causing issues with Letters of Credit. Weekly arrival reports at recycling centers indicate a decreasing number of vessels being recycled in Chattogram.

GMS, the world’s largest cash buyer of ships, reported a cooling trend in sub-continent ship-recycling destinations, including India and Bangladesh, as inflation, fundamental factors, fluctuating currencies, vessel pricing, and overall weakening sentiments have affected the market. Despite these challenges, there is growing optimism fueled by a 3% improvement in global steel plate prices over the week. This positive trend has led to speculation that the ship recycling industry could experience a more stable period in 2024, especially if steel plate trends continue to improve and elevate vessel prices after the Diwali holidays in November.

Additionally, Turkish import steel prices have appreciated by about USD 11/T in the same period, indirectly influencing vessel prices, which have improved by about USD 10/MT. This firming trend has brought offer levels from Aliaga back to the USD 300/MT range. However, the industry still faces a global shortage of tonnage, primarily consisting of older 90s built bulkers and occasional container units. This shortage may change as the industry moves into 2024, with markets upgrading facilities to meet the Hong Kong Convention (HKC) standards and accommodate the anticipated volume of vessels entering the recycling space next year. Notwithstanding, there remains the ongoing global shortage of tonnage as mostly older, 90s built Bulkers are being introduced for recycling (along with the odd container unit), whilst supply is yet to hit acceptable levels for the year. This may certainly change as we head into 2024 and when all markets are hopefully firing and continually improving / upgrading their facilities to HKC standards, in order to have the necessary capacities for the anticipated volume of vessels that is expected to enter into the recycling space next year.

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The ship recycling market has experienced significant fluctuations, with prices dropping from peaks above USD 600/LDT earlier in the year to a decrease of over USD 100/LDT during the summer months. Despite these challenges, industry players are optimistic about a positive conclusion to the year. They hope for a stable recycling market in the coming months and an optimistic start to Q1 2024. As the industry navigates these challenges and anticipates improvements in various factors, stakeholders are cautiously optimistic about the future of ship recycling, expecting a more positive and stable market in the near future.

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