India’s imports of cheap
Chinese steel between April 2014 and January 2015 were almost treble those of
the previous fiscal period.
The country imported
more than 2.9m tonnes, exerting more downward pressure on the scrapping rates
offered by Indian ship-breaking yards.
Confirmation of the
massive increase in steel billets from China came in a written reply to a
question in the Indian parliament’s lower house, the Lok Sabha, this week,
prompting calls for the introduction of punitive duties or even a temporary ban
to give Indian producers some respite.
Steel and mines minister
Vishnu Deo Sal said the government’s role was “limited” as steel was a
deregulated sector – however, he offered the olive branch that the government
was considering including a duty increase on semi-finished steels in the coming
budget.
A cooling of the world’s
second-biggest economy has left Chinese steel producers with too much product
on their hands and, as a consequence, this is finding its way to export
markets.
According to broker
sources, Chinese steel scrap is on offer in the $250-$275 per tonne range,
ex-quay Indian port, and this has had a disastrous impact on ship-scrapping
rates.
Respectable recycling
rates of around $500 per LDT were obtained by shipowners last June, but by
year-end rates had plunged to below $400.Now, due to the Chinese competition,
there are reports of sales at $300 per LDT, or less.
Understandably, owners
and brokers are sitting tight, hoping to ride out the downturn, with just a few
vessels currently being scrapped – largely due to acute cash flow problems.
Moreover, the vessel
demolition market is also being challenged by a Chinese state subsidy of $150
per GRT to owners of China-flagged ships recycled at domestic breaking yards.
Scheduled to last until
the end of 2015 – or longer– unsurprisingly, this subsidy has virtually
excluded all internationally-flagged ships from scrapping in China. And it has
added even more pressure to recycling rates in the Indian subcontinent.
The pessimistic outlook
for scrapping rates comes at a bad time for container shipping, given the flood
of newbuilds expected to hit the seas this year. As a result, owners may decide
to lay-up surplus ships rather than accept depressed scrapping rates, hoping for
new employment for them until scrapping rates recover.
Moreover, if fuel prices
continue at their current level and ships, in particular those on ad-hoc
voyages, speed up to reduce daily hire costs, fewer vessels will be required.
Consequently even more
will need to be either idled or scrapped.
Source: the load star. 13
March 2015
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