The Diwali holiday season is once more upon us, resulting in substantial volatility in the shipbreaking market, with cash buyers appearing intent on speculating well ahead of the market in anticipation of some post-holiday buoyancy, and end buyers keen to stock their plots before the holiday break.
The increasing weakness of the Indian rupee against the US dollar (it sagged to a level of INR62 against the greenback), and constant fluctuations of steel prices within a $5-10 per ldt range, added to the volatility in the market.
Local prices at Alang are nowhere near reflecting those being offered by cash buyers, and there is some concern about the security of those deals done at high rates – particularly if the market turns or fails to climb to breakeven levels for the concerned cash buyer.
"Rates at present are already firm, and many end buyers are nervous about increasing prices to the levels that over-zealous cash buyers are demanding," said Dubai-based cash buyers GMS. "Indeed, many local buyers are feeling somewhat stretched at present levels and are not inclined to improve prices on available units at all."
Pakistani buyers continued to offer the best rates in the market, despite there being a cautious undertone to their bidding of $490 per ldt for clean tankers and $460 per ldt for general cargo vessels. They have had an outstanding third quarter in terms of purchases and profits.
Bangladeshi buyers, who have suffered from an abnormally torrential monsoon, were next in the pecking order, offering $5 per ldt less than their Gadani counterparts in both categories. Alang operators were further adrift with bids of $480 and $450 per ldt respectively, for wet and dry tonnage.
The talking point of the last week of September was the unreal $535 per ldt rate at which the 10,448 ldt container vessel Altavia sold. It seemed to be a one-off deal, since no other vessel in that segment could attract a bid anywhere near that figure.
The other notable sale of the week was that of the Chinese controlled 8,671 ldt general cargo/tweendecker vessel Zhong Xiang, which attracted a rate of $512 per ldt. Brokers noted that the ship's favourable size, heavy propeller, November delivery and low beam all contributed to the impressive price.
Also achieving a decent price was the 4,950 ldt 'tween vessel Lalila Queen, which changed hands at $494 per ldt, with approximately 125 tonnes of bunkers on board upon delivery. The 20,748 ldt ro-ro/ container vessel Jolly Arancione was also sold at a fine rate of $463 per ldt on "as is Port Rashid" basis.
Overall, most end buyers across the sub-continent seem content to wait out the Eid holidays (in Pakistan and Bangladesh) and Diwali holidays (in India) before committing on new tonnage, sensing that perhaps the peak on prices may have been reached already and the only direction now is down.
Source: seatrade-global. 06 October 2014