07 November 2011

Steel prices to bring down demolition values?

Average demolition values in China and the Indian subcontinent have come under  pressure  recently,  with  $/LDT  values  posting  a  7.3%  decline  since mid-October. Although global steel prices have gained 4.8% since January, prices have shed 13.9% since reaching a YTD high in March.  

Given  the  price  discount  for  steel  reclaimed  via  tanker  demolitions  in locations  with  cheap  labor  relative  to  global  steel  prices,  demolition  values have  been  less  impacted  than  global  steel  prices;  average  China  and  Indian subcontinent $/LDT values have only lost 2.5% since March.  

Several global steel production facilities are reportedly idling production as the  European  sovereign  debt  crisis  continues  to  stoke  uncertainty  in  global markets.  Accordingly, the gap between global steel price indices and demolition values could narrow, mitigating greater further $/ldt losses.

Despite  a  more  limited  pricing  gap,  even  minor  $/ldt  losses  may  present fresh  downside  risk  for  tanker  markets  as  the  recent  progression  to  newer, double  hull  tanker  demolition  sales  remain  one  of  several  key  factors  to alleviating overcapacity in the sector.  

During  October,  double  hull  tonnage  accounted  for  78.1%  of  the  total
tanker  tonnage  demolished  –  up  significantly  from  an  average  of  18.0% during  the  first  3  quarters.  Over the past two weeks, however, demolition sales  activity  has  declined  markedly,  with  just  one  unit  reported  as  sold  to such buyers.

Reported Tanker Demolition Sales -

WEEK 43:


“SEBAROK SPIRIT” 95,649/93 - 15,661 LDT  
- Sold for $481/LDT basis as is, Singapore including 400 
MT bunkers ROB. (Double Hull

WEEK 44:

NO tanker demolition sales were reported for week 44.  

Source: Hellenic Shipping News (Sourced from Charles R. Weber Weekly, www.crweber.com). 6 November 2011

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