22 July 2018

Demolition Activity Falls As Tonnage Supply Dwindles

Activity in the ships’ demolition market has been slowing down over the course of the past few days. In its latest weekly report, shipbroker Clarkson Platou Hellas said that “as the Eid holidays finally came to an end, there appears to have been a slowdown in activity last week due to a lesser supply of tonnage and also, a weakening of the respective currencies in the Indian subcontinent destinations. In Pakistan, the recyclers are starting to factor in the cost of the sales tax duty, coming into effect this week, for any new available tonnage and thus, this will restrict any potential improvement in rates for the foreseeable future”.

According to Clarkson, “Bangladesh and India have both suffered a weakening of their currencies against the U.S. Dollar this week which may also stem some positive offering from the waterfront. But all in all, we are still witnessing a somewhat stable and relatively calm market. Meantime, a fresh argument has reportedly broken out over the European ship recycling regulation, due to come into force at the end of this year. European Ship Owners stress, rightly, that there is insufficient capacity on the European list of approved yards and strongly believe some of the Indian yards are brought into the equation. The usual counter arguments from the lobbyists is that this is not true and there is sufficient capacity”.

The shipbroker added that “the European Ship Recycling regulation was established in 2013 calling for a list of approved facilities to be drawn up and for ships under European flags to then only be recycled at one of these approved facilities. The regulation also calls for all vessels calling at E.U. ports to have an approved and valid Inventory of Hazardous Materials (IHM) kept on board the vessel. This latest disagreement is because the current list of approved recycling yards consists of only 21 facilities, simply not sufficient enough for the demands of recycling vessels during the year (especially now that China has announced no further importing of international flagged vessels for recycling). All the facilities on the list are in Europe and no Indian subcontinent yards are being considered due to the word ‘beaching’. Yet, the improvements made to the Indian yards in particular, have been immense over recent years and on par with their counterparts in Europe. Unfortunately, these environmental organisations will not accept a vessel having to be beached despite major improvements towards labour and the environment in the recycling destination of India and the PHP yard in Bangladesh. The E.U. commission are working towards incorporating some of the better yards in India on their list with certain inspections/visits having been arranged, but it does not help their plight with consistent negative reporting from the various lobby groups. The E.U. are being urged to rapidly include non-European facilities onto the list, in particular, the Indian recycling yards that have been approved under the H.K. Convention. It is hoped that common sense will prevail and those yards that have upgraded their facilities will be rewarded with E.U. approvals. Interesting times indeed lie ahead in this respect so we at the moment, can only ‘watch this space!’, Clarkson Platou Hellas concluded.

Meanwhile, in a separate note, GMS, the world’s leading cash buyer of ships said that “with the summer / monsoon season fully under way across the Indian sub-continent, prices and demand have started to decline across the board for various reasons. While on the one hand, the seasonal labor returning to their home towns due to the constant rains affecting the cutting processes and hampering overall production is the traditional reason for the cooling markets, on the other hand, declining local steel plate prices, currencies and missing cutting permissions have driven demand for tonnage, down this week. As such, most end Buyers are preferring to temper their purchases as levels and interest slips in anticipation of a potential fourth quarter rally, which has historically been a busy period in the ship recycling industry and this year is expected to be no different, given that owners (particularly in the tanker sector) continue to struggle with dire charter rates and (wet) units seem to fall out of the sky. A sustained level of scrapping of tanker and offshore fleets will be needed just to aid levels and bring a certain equilibrium back to these sectors in the years ahead – just as dry and container rates have finally bounced back, following a period of sustained recycling in the years gone by. Supply is expected to persist going forward and sales will continue to take place, often to speculative Cash Buyers who do not have end Buyers lined up but prefer to utilize their available finance streams. As such, as long as the inflow remains at a steady trickle rather than a deluge, prices should remain relatively stable as the markets sail through the monsoons”, GMS commented in its weekly analysis.

Source: Hellenic shipping news. 06 July 2018

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