23 October 2017

Ship demolition activity grinds to a halt

The rebound of dry bulk freight rates, as well as ships’ values has resulted in the halt of demolition sales, triggering fresh concerns regarding the long term viability of the market’s rebound. In its latest weekly report, GMS, the world’s leading cash buyer of ships said that “a shocking collapse in price and sentiments over the last few weeks resulted in a grinding halt to a lot of the offerings / ongoing negotiations with end Buyers in the various subcontinent locations this week. Most sub-continent recyclers are entering the dreaded wait and-watch mode to see where prices are headed, before committing themselves on new units”.


GMS added that “depending on which report you rely on, prices have declined anywhere between USD 30/LDT to about USD 50/LDT since the peak seen during August / September. Much of this can be attributed to the fact that local steel plate prices have been rather volatile, resulting in recycled material not moving quick enough from local yards. This has in turn left Recyclers increasingly reluctant to take in new inventory. In China, the Communist Party Conference has seen a halt to virtually all ship recycling activity and the lack of any meaningful negotiations and acquisitions is having a knock on effect throughout the Indian sub-continent and Turkish markets. As local steel plate prices cooled (significantly) over the last few weeks and currencies (in both Turkey and India) depreciated overall as well, a perfect storm of declining prices and negative sentiments sweeps across the industry. Moreover, upcoming Diwali holidays will likely ensure that the lull in activity and sales will continue for at least another week”.

According to GMS, “as such, most cash buyers remain unwilling to commit their unsold tonnage at some of the exploitative numbers currently being tabled by end users. Not all however, is doom and gloom. There has been a noticeable slowdown in potential tonnage for sale as freight rates (in the dry bulk and container sectors) push on. Although down overall, steel prices in China and Turkey too improved marginally this week, in the first green shoots of a possible upcoming recovery and the industry could see a sustained recovery once Diwali and the Communist Party Conference in China conclude from the end of next week onwards, leading into November”.

In a separate report, shipbroker Intermodal noted that “the first cracks that appeared in the demolition market at the end of last month have been slowly transforming into full on pressure on prices, with average bids across the most popular demo destinations moving down for a third week in a row. The shaky Chinese market has been greatly impacting sentiment and lately prices as well in the Indian subcontinent where softer local currencies have brought about additional pressure on the markets there. As a result, activity has been slowly softening, with the number of cash buyers who feel comfortable enough to commit themselves amidst a falling market seriously limited at the moment. The Diwali holidays that will kick off tomorrow are also expected to affect activity in the following days as well, while the one silver lining at the moment is the supply of demo candidates that has been substantially softening amidst improving freight markets in all of the more conventional sectors during the past weeks. Average prices this week for tankers were at around $255-415/ldt and dry bulk units received about 245-395 $/ldt”, said Intermodal.

Similarly, Allied Shipbroking noted that “despite the fact that we continue to see fairly firm prices being quoted by breakers and with appetite holding at firm levels across most of the Indian Sub-Continent, activity has remained relatively slow, compared to the average levels noted in the year so far. The considerable improvement in the dry bulk freight market and the sharp increase in asset prices that have emerged as a consequence has limited the supply of demo candidates from this vital sector. We have seen a fair rise in the volume of tanker vessels being sent to be beached but nothing extra-ordinary, given that the overall tanker fleet has a very limited number of vessels that can be considered overage. This general lack in demo candidates is likely to keep the competition amongst cash buyers at firm levels, helping to support the current highs being noted in terms of prices for scrap for a at least a little while longer”, the shipbroker concluded.

Source: hellenic shipping news. 19 December 2017

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