IHS Maritime 360 – Cheap scrap pushes South Asia ship recycling to near shutdown

(Written by Crystal Chan)

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9 February 2015 - Ship recyclers on the Indian subcontinent are becoming increasingly discouraged from buying ships as the unrelenting influx of cheap Chinese steel pushed scrap prices down again last week.

Bulkers are now priced at $350–370/ldt and tankers at $380–400/ldt.

Dubai-based cash buyer Global Marketing Systems said, “End users cannot shift inventory from their yards at present and are limiting their output to the steel mills, as the Chinese steel is being sold at such a discount locally (despite its inferior quality), that it is close to halting local ship recycling activity altogether.”

The world’s largest cash buyer noted that many players in the industry have started to feel ‘comfortable’ with the price below $400/ldt on bulkers and tankers/containers, but were shocked when the prices plunged by another $50/ldt within one week.

However, the unrelenting drop in the Baltic Dry Index has compelled some Capesize owners to continue disposing older tonnage.

Last week, Eastern Pacific sold its 1996-built Capesize bulker Fernie for $6,715,500 or $407/ldt for demolition in Bangladesh.

Other than that, no sales were reported in India and Pakistan last week.

GMS remarked that the price drop has fallen beyond the Indian ship recycling market fundamentals and is showing no signs of slowing down.

According to GMS, some industry insiders deemed the recent fall to be ‘somewhat artificial’ and price drop has plummeted too fast and too sharp to be true.

“End buyers have withdrawn offers on working vessels (leaving many cash buyers terribly exposed) and those vessels committed at higher prices some time ago are faced with torturous renegotiations upon arrival at the shorefront.”