Tradewinds – Indian currency collapse sees ship scrapping dry up

(Written by Adam Corbett)

10 July 2013 - Shipbreakers are hesitant to do deals following the devaluation of the Indian rupee against the dollar

A collapse in the value of the rupee from INR 50 to the dollar to INR 60 has seen the demolition market come to a virtual standstill, with only a handful of deals being done.

Demolition finance expert and general manager at cash buyer Mideast Shipping & Trading Steve Wansell says that, with Indian breakers getting fewer dollars for their rupee, they have withdrawn from the market.

Breakers have traditionally avoided using currency hedging tools, leaving them exposed to sudden currency changes.

Wansell says owners also had unreal expectations over the scrap value of their ships, which would not be realised at current exchange rates.

“It’s a really challenging market,” he said. “We are seeing the rupee at historic lows against the US dollar and breakers with rupees in their pocket are reluctant to do business. Then there are owners who are looking at sales six weeks ago and today think their ships are worth more than they are.”

But he points to other factors making this one of the quietest months for breaking deals in recent memory. The Muslim holy month of Ramadan coincides with the onset of the summer holidays, making it a quieter than usual summer season for demolition sales. Then there is the continuing monsoon, which always impacts on the recycling market.

Yet some deals still managed to get done. The Polembros-controlled 150,000-dwt suezmax Naviga (built 1998) went to Pakistan for $440 per ldt. The 13,560-dwt reefer Rainforest (built 1985) was also said to have been sold to Indian breakers for $372 per ldt.

Two South Korean handysize bulkers were also sold to Bangladesh breakers at very different prices. The 31,895-dwt Sea Emerald (built 1986) was sold for $407 per ldt at what appears to be an exceptionally high price.

Broker Edward McIlvaney commented: “Such a price is very unlikely to be repeated in today’s market.”

In a deal that reflects today’s lower values more closely, the 31,253-dwt Sun New (built 1985) went for $360 per ldt.