The extreme volatility noted in the
demolition market could prove hurtful for those ship owners who are actively
researching the market to liquidate their older carriers. As such, activity
could slow down, not because ship owners’ are less willing to sell their
vessels, but because yards could be “tightening their belts”, looking to hedge
against the market’s current trend.
In its latest weekly report, the world’s
leading buyer of older tonnage, GMS, said that “just when it seemed as though
the Indian sub-continent ship-recycling industry had bounced back after its
Ramadan and summer lull, a series of setbacks left prices in question once
again. As a result, several unfortunate cash buyers still carrying high priced
unsold inventory on hand are now left with slim to no chance of breaking even,
let alone making any profit at all. The extreme volatility witnessed from week to
week is making this a very confusing market to operate in and some of the more
sensible players are refusing to buy as a result, instead preferring to see a
settled pattern on rates emerge, before offering once again. Bangladesh steel
prices fell by as much as USD 10/LDT this week just as one the highest priced
capes of the last few months was committed, certainly a one-off number given
the current sentiment there”, said GMS.
Meanwhile, according to the company, “Indian
buyers have not displayed any of the irrational exuberance displayed last week
from their Pakistani or Bangladeshi markets (and even many of the cash buyers),
instead holding steady on to their numbers and not bidding to levels where they
are no longer comfortable. The habit of jumping wildly on prices has long been
associated with the Bangladeshi market and it seems such was the case again
this week, with the sale of the cape in question. Perhaps to a buyer who was
desperately seeking to fill his plot, in order to satisfy a bank limit? Many
panamax-sized containers bought during the recent spike remain unsold in
various cash buyer hands and with Pakistan not favoring containers (due to
heavy draft restrictions), Bangladeshis hurt by the recent decline in steel and
Indian end-users stubborn on their offers, this tonnage may remain unsold for
some time yet, at least until the respective cash buyers are no longer able to
carry this tonnage any longer”, GMS concluded.
In a separate note, shipbroker Intermodal
noted on the demolition market that “the recent excitement felt across the
Indian subcontinent demolition market proved to be short lived after all, as
momentum clearly lagged behind last week, with both sentiment and buying
appetite taking a hit. The downward correction in local steel prices in
Bangladesh has not particularly affected activity so far, but breakers in the
country have already lowered their bids and are expected to also be less active
in the following days if the pressure on steel prices persists. At the same
time, Indian buyers are keeping a more steady approach to their bids in their
extended effort to regain a substantial market share back, while overall, we
expect the next couple of weeks to be rather slow, not only due to seasonality
but also due to the fact that the highly volatile environment of late is
offering little comfort to Indian subcontinent breakers that these are the
price levels they should be positioning themselves at. Prices this week for wet
tonnage were at around 175-275 $/ldt and dry units received about 155-255
$/ldt”, Intermodal concluded.
Allied Shipbroking added that “with appetite
amongst breakers holding firm for the time being there seemed to be have been
enough competition amongst buyers to keep price levels on the high marks. With
a considerable improvement in terms of demo candidates entering the market
though, something which may well dampen things further more over the coming
days we have seen cash buyers cut a slice or two off their current price
offerings. The drop in local steel plate prices seemed to have been the cause
for this sudden change in hart and now many end buyers are stuck with fairly
pricy units in their hands. For the time being however it looks as though
sellers have managed to gain from the previous upward shift in prices and given
the fact that we are still at better off prices then we were a couple of weeks
back, momentum in scrapping activity has reemerged slightly despite it being
mid summer and still during the monsoon period for the Indian Sub-Continent.
The general expectation amongst most is that prices could trend upwards once
more before the end of the monsoon season, while as things stand now many feel
it will be a fairly busy final quarter of the year”, the shipbroker concluded.
Source: Hellenic
shipping news. 4 August 2016
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