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Ship Recycling in India Picks Up Steam as Owners Cash In on Ageing Vessels

Ship Recycling in India Picks Up Steam as Owners Cash In on Ageing Vessels

Ship Recycling in India Picks Up Steam as Owners Cash In on Ageing Vessels

There’s a flurry of activity in the ship recycling industry across India and neighbouring countries, according to a report by cash buyer GMS. This surge comes after recent turmoil in shipping trade lanes.

Owners Sell Overaged Ships as Freight Rates Dip

The report highlights a growing trend of ship owners selling their older vessels for recycling. This trend is particularly evident in the container sector, which has been hit hard by the recent decline in freight rates. Several container ships have already been sold for scrap, and more are likely to follow suit.

Dry Bulk and Container Sectors Drive Demand

GMS explains that the recent focus on recycling has been on dry bulk and container ships. These sectors enjoyed a boom during and after the COVID-19 pandemic, further fueled by geopolitical tensions in 2023. However, the report suggests that these sectors were overdue for a cleanup.

Bidding Wars Erupt as Recycling Prices Rise

The report describes a renewed enthusiasm for acquiring ships for recycling. Bidding wars are breaking out at shipyards in various locations, including Turkey. Turkish recyclers are particularly aggressive, reportedly willing to exceed market expectations to secure vessels.

Price Increase for Larger Ships

The price hikes for ships targeted for recycling are significant. Vessels between 4,000 and 9,000 Light Displacement Tonnage (LDT) have seen a minimum price jump of $20 per ton. Larger ships exceeding 10,000 LDT are experiencing even steeper price increases, with some fetching over $40 per ton more. This trend is pushing overall recycling prices towards the mid-$550s per LDT in major Indian subcontinent markets and even approaching $400 per ton in Turkey.

Ship Owners Cash In on Higher Prices

GMS reports that ship owners are finally comfortable selling their older vessels at these higher price points. This trend is particularly evident among owners of older bulk carriers, especially Handysize and Panamax vessels. The recent surge in dry bulk freight rates, while likely temporary, seems to have incentivized owners to cash in on their ageing assets.

Wet Market Remains Strong, Limited Recycling Activity

The report also notes that the tanker and Floating Storage and Offloading (FSO) market remains bullish. This means there’s little chance of a significant increase in the number of tankers or FSOs being sent for recycling anytime soon. However, some tankers and FSOs have recently been delivered to shipbreaking yards in India and Bangladesh.

Bangladesh Leads the Way, India Follows Closely

GMS identifies Bangladesh as the primary beneficiary of the recent surge in ship recycling activity. Ship owners are reportedly hopeful of reaching or exceeding the coveted price point of $600 per LDT in Bangladesh. Meanwhile, India remains close behind Bangladesh in terms of pricing.

Pakistan Takes a Backseat

After a brief period of strong performance, Pakistan’s ship recycling industry has fallen behind. The report attributes this to impractical pricing demands for geographically well-positioned ships available in the western part of the country.

Overall, the report paints a picture of a resurgent ship recycling market in India and neighbouring countries. Driven by higher recycling prices and a decline in freight rates, ship owners are cashing in on their ageing vessels. While Bangladesh is currently leading the pack, India remains a strong competitor in this growing market.

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