Cash buyers are left with a substantial inventory of ships as ship recyclers in South Asia have refrained from committing to tonnage in the face of a relentless drop in demand for scrap steel.
The influx of cheap steel imports from China has dampened the demand for scrap steel in South Asia, a situation that has slashed demand for recycled ships even as the dry bulk freight market has plunged.
Last week, no sales of ships for recycling were reported.
Indian cash buyer Star Matrix noted that scrap prices at local shipbreaking yard has dropped from INR29,000 (USD467) per tonne in October 2014 to INR21,000 per tonne this month.
Star Matrix commented, "Only 40% of 160 shipyards are open for business. These yards are operating at 35% of their original capacity. Rolling mills/end users are operating at 25% capacity just to maintain the supply for the basic demand that arises from local infrastructure market."
Scrap import is available at the range of USD245-275 per tonne depending upon the quality and port of discharge.
Star Matrix continued, "The above local sentiments along with the influx of tonnage in the international market has created and will continue to create further drop in prices until the demand supply finds its balanced equilibrium."
Dubai-based cash buyer Global Marketing Systems said, "Many buyers are now benchmarking USD350/ldt as the new reality on bulkers with about USD20-25/ldt premium for tankers [hot works clean] and containers. There are those [cash buyers and end users alike] who are simply refusing to offer on available units until several weeks of stability has prevailed.
"Although this might be a sensible strategy, it is not an option for cash buyers who hold expensive inventories in their hands as one cheap sale can see huge amounts wiped off those vessels."
Source: his maritime 360. 16 February 2015http://www.ihsmaritime360.com/article/16703/standstill-persists-in-ship-recycling