09 April 2014

India's shipbreaking market on fire:

India's junk ship market is on fire, with the bulk of demolition sales being concluded from the country. The main reason was optimism in the industry over the strengthening of the rupee, which dipped briefly below the INR60 per US dollar mark for the first time this year.

Local levels, however, still did not reflect prices being offered up by cash buyers for international tonnage. These operators, who bought junk container ships at huge levels over the last month, are set to lose money on these speculative purchases as the local market is unable to support such high prices.

“Just one poor day of reversals on the rupee or significantly depreciating steel plate prices could see local sentiments and prices reverse very quickly,” the Dubai-based cash buyers GMS warned. “Thus, it is a risky strategy being employed by many, just to get their hands on available tonnage, and owners need to be aware of simply taking top dollar.”

The Bangladeshi market is already displaying signs of exhaustion, and the demand for usually favoured larger units is virtually non-existent locally, with the focus having shifted to the acquisition of smaller to mid-range vessels.

As many of the bigger buyers currently have their plots full, the aggression to buy was largely absent from the Bangladeshi market. Market operators found it distinctly galling to see large-ldt vessels, which normally have Chittagong as their final halt, go past Bangladesh to more lucrative markets.

Improving demand and levels in Pakistan saw local buyers pick up a number of their favoured larger-ldt units from existing cash buyer inventories. Remarkably, these included several of those hard-to-sell panamax-sized container vessels.

Bids from China and Turkey remained marooned a substantial way behind their Indian sub-continental competitors – by as much as $150/ldt in some categories. However, supply to these markets continued from lower-ldt vessels positioned in the area, green vessels; or, in the case of China, from state owners enjoying the generous scrapping subsidies on offer.

Nevertheless, the China National Ship Recycling Association feared that China’s shipbreaking industry would repeat last year’s financial losses in 2014 amid government plans to cap steel output in the face of limited ferrous scrap demand, high purchase prices for obsolete vessels and a steady decline in domestic scrap prices.

Pick of the recent sales was the 6,815 ldt PIL-owned 6,815 ldt container vessel Kota Wijaya, which went to India at an almost unreal $525 per ldt, with 350 tonnes of bunkers on board. The small size, bunkers and decent ownership secured the high price.

Another container ship to attract a strong price was the Lomar controlled 10,317 ldt Athens Trader, which was sold to Alang on “as is Jebel Ali” basis for $495 per ldt, with 120 tonnes of bunkers on board.

Alang also picked up the Egyptian owned 5,853 ldt bulk carrier Amira Mariam at $465 per ldt, while the 4,950 ldt multi-purpose vessel (converted from containership) Aqua Luna attracted an impressive rate of $480 per ldt.

While no market sales were reported from Bangladesh, Pakistani buyers picked up the 15,646 ldt Aframax tanker Eagle Otome from American owners Icon Capital at a firm $474 per ldt on “as is Malaysia” basis, for man entry only.

Source: Sea Trade Global.  9 April 2014

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