The Ship Recycling Slump Continues: With a Glimmer of Hope?
The first quarter of 2024 is over, Ramadan is nearing its end, and Eid celebrations are approaching. According to GMS’s latest ship recycling report, this translates to another sluggish week for global ship sales and activity.
The report paints a grim picture. With a growing number of vessels already dismantled and minimal new arrivals (India reported ZERO this week), industry participants are feeling increasingly discouraged. However, a surprising development emerged amidst this pessimism: several high-value ship sales were confirmed, primarily to Bangladeshi and Pakistani yards.
This unexpected surge in prices could be attributed to two factors. First, the lack of available ships for recycling might be pushing prices up in an attempt to entice ship owners to sell their vessels. This comes after a period of minimal activity and a bleak outlook for the industry. Second, the high freight rates experienced in dry bulk, general cargo, and container sectors this year might be keeping older vessels operational for longer. This explains the influx of extremely worn-down, older ships into the recycling market.
The report highlights the ongoing geopolitical turmoil as a reason for the elevated freight rates, ultimately leading to inflation in countries like Turkey. Turkey’s ship recycling industry remains stagnant, with no significant activity reported.
In contrast, India showed some signs of revival with a few offers being made on the limited available ships. These offers, however, were lower than those seen in Pakistan and Bangladesh. Nevertheless, this activity is a welcome change for Alang, a major shipbreaking yard in India, where many are anxiously awaiting election results. A potential loss for the Modi government could negatively impact the country’s economy, further hindering the ship recycling industry.
On a brighter note, currencies in all major ship recycling nations, including Turkey, saw positive movements this week. This raises the question – could these economies finally be finding some stability? Only time will tell if this is a temporary fluctuation or a sign of long-term improvement.
However, amidst this quiet period, there have been some surprising high-priced sales, particularly in markets like Bangladesh and Pakistan. This has led some to believe that prices might be on the rise again. The scarcity of available vessels for recycling could be pushing prices up, despite the overall pessimistic outlook for the industry.
The vessels available for recycling are mostly older dry bulk, general cargo, and container ships. The poor condition of these vessels reflects the challenging economic conditions, exacerbated by geopolitical tensions. This has kept freight rates artificially high, leading to inflation in countries like Turkey.
India, though lagging behind Bangladesh and Pakistan in terms of market strength, has shown some signs of improvement. Despite uncertainties surrounding the election results, there have been some offers on a limited number of vessels in India. This is a positive sign for the industry, especially for places like Alang, where people are anxiously awaiting the outcome of the elections.
Interestingly, currencies of recycling nations have shown positive movements this week, including Turkey’s Lira, which strengthened. This could indicate a stabilizing trend for economies reliant on ship recycling, but only time will tell if this trend continues.
In essence, the report reveals a struggling ship recycling industry facing a shortage of vessels. While high-value sales and positive currency movements offer a glimmer of hope, the overall outlook remains uncertain.
