04 July 2018

GMS Market Commentary on Shipbreaking in Week 26 - SEASONAL DIP?

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.

Source: steel guru. 03 July 2018

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