23 July 2015

Shipbreaking industry facing recession

No ships were reported as sold for recycling into South Asia from 13-17 July as the Ramadan holidays and falling steel prices in India removed all appetite to purchase vessels.

Scrap prices of bulkers deteriorated to USD310-315/ldt, compared with USD325-335/ldt from 6-10 July. Over the same period, scrap prices of tankers declined to USD340-345/ldt, from USD355-365/ldt.

The Baltic Dry Index's plunge to a historic low in February precipitated a rush by shipowners to scrap bulkers and forcing down prices. However, the slowing Chinese economy that resulted in exports of cheap steel also compounded the situation.

Indian cash buyer Star Matrix commented, "Finally the recession in shipping has spread its shadow on the demolition industry, the only segment which is responsible to take excess tonnage out of water to eventually bring cargo-tonnage equilibrium is now facing financial crisis and demand crunch."

In India, steel prices have fallen by about USD20/tonne from 13-17 July, compared with the previous week.

The situation is such that ship breakers have been making losses on acquired tonnage and some of them are facing bankruptcy.

Dubai-based cash buyer Global Marketing Systems (GMS) said, "Notwithstanding the improvement, local sentiment remains in tatters, with over 50% of the yards now out of action - either facing foreclosure from the banks or voluntarily removing themselves from the buying whilst markets remain in such a perilous state."

However, GMS said there could be hope for the industry as some Chinese steel mills might shut due to the slowing economy.

Source: ihs maritime 360. 21 July 2015

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