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