Ship recycling markets slump as economic woes bite

Sales of ships for demolition slumped from 6 to 10 July as Greece's financial crisis and China's stock market crash made scrap yards unwilling to acquire tonnage.

Bulkers, especially, had a hard time attracting buyers due to the ongoing deluge of such ships being sold for recycling.

The Baltic Dry Index's slump to a historic low in February and the slow market recovery are encouraging shipowners to part ways with unprofitable vessels.

As a result, scrap prices of bulkers have fallen to USD325-335/ldt, compared with USD330-340/ldt from 29 June to 3 July.

In Bangladesh, an ample supply of ships combined with difficulty in securing letters of credit have prevented ships from being sold.

Dubai-based cash buyer Global Marketing Systems (GMS) said, "Many banks are refusing to sanction letters of credit due to the perilous state of the industry. Moreover, as with India, there are questions over the financial security of even some of the better buyers in Chittagong."

However, some cash buyers are still speculating on an eventual market recovery, resulting in 1983-built Handysize bulker Merry Ocean fetching USD1.89 million or an unbelievable USD360/ldt, a deal GMS claimed would result in losses for the shipowner or cash buyer.

Related news: Shipbreaking prices sour further

Merry Ocean's 220 tonnes of leftover bunkers resulted in the higher price when it was sold for recycling in India.

"The one encouraging factor saw the Indian rupee maintain its reasonable rate at about INR63 to the US dollar, although most connected to the industry expect the currency to depreciate given the current global economic conditions," said GMS.

"The fear is that an import of cheap Chinese steel will flood the market again, resulting in the inability of end users to shift their high-priced inventory from their yards quick enough - something that has already seen several high-profile recyclers forced out of business."

In Pakistan, the imposition of USD10-15/ldt in taxes on ships, and the fact that yards are full with bulkers, have deterred recyclers from buying ships.

Source: ihs maritime. 14 July 2015

http://www.ihsmaritime360.com/article/18616/ship-recycling-markets-slump-as-economic-woes-bite 

Manila reinforcing rusting ship as Spratly reef outpost:

MANILA (Reuters) — The Philippine Navy is quietly reinforcing the hull and deck of a rusting ship it ran aground on a disputed South China Sea reef in 1999 to stop it breaking apart, determined to hold the shoal as Beijing creates a string of man-made islands nearby.

Using wooden fishing boats and other small craft, the navy has run the gauntlet of the Chinese Coast Guard to move cement, steel, cabling and welding equipment to the BRP Sierra Madre since late last year, two navy officers who have been inside the vessel told Reuters in recent interviews.

The 100-meter-long tank landing ship was built for the U.S. Navy during World War II. It was eventually transferred to the Philippine Navy, which deliberately grounded it on Second Thomas Shoal to mark Manila’s claim to the reef in the Spratly archipelago of the South China Sea. A small contingent of Philippine soldiers are stationed onboard.

Manila regards Second Thomas Shoal, which lies 105 nautical miles southwest of the Philippine region of Palawan, as being within its 200-nautical-mile exclusive economic zone. China, which claims virtually all the South China Sea, says the reef is part of its territory.

“We know China has been waiting for the ship to disintegrate, but we are doing everything to hold it together,” said one of the officers, adding that while the work was progressing slowly, it should be finished by the year-end.

The other naval officer said welding was being done at night because of the heat. Concrete foundations were being laid inside the ship’s hull to try to stabilize it, he added.

Without giving exact dates, both sources said they witnessed the repairs taking place earlier this year. They declined to be identified because they were not authorized to speak to the media.

The soldiers currently stationed on the ship, who are demolition experts, were doing the work, said the second source.

Just to the west of Second Thomas Shoal is Mischief Reef, one of seven coral formations in the Spratlys that China is rapidly turning into islands that Beijing says will have undefined military purposes.

Vietnam, Malaysia, Taiwan and Brunei also have overlapping claims to the Spratly waterway, which is some 1,100 kilometers from the Chinese mainland.

Asked about the repairs, Philippine Foreign Ministry spokesman Charles Jose declined to comment. But such work would not violate an informal code of conduct signed in 2002 by China and Southeast Asian states that prohibited any change to the status quo in disputed areas, he said.

“In our view, repairs and maintenance of existing facilities are allowed ... especially if such repairs and maintenance work are for the safety of our personnel and safety of navigation,” Jose added.

The Philippine Defense Ministry declined to comment.

China’s Defense and Foreign Ministries did not respond to a request for comment.

A Philippine general familiar with the repairs told Reuters the ship’s hull and deck were being strengthened, and air-conditioning units added.

“We are improving the living quarters inside, to make life for our soldiers more comfortable,” he said, declining to give further details about the repairs or be identified.

Pictures taken by a Reuters photographer who sailed to the BRP Sierra Madre with other media in March last year show a pockmarked vessel covered in rust, sitting on the permanently submerged reef but listing slightly to one side. Much of the boat’s hull is visible.

Still on active duty

Besides being a military outpost, the BRP Sierra Madre is also a commissioned Philippine Navy ship.

That means Manila could request U.S. military assistance under a decades-old security treaty with Washington if the ship was attacked, said senior Philippine military officials.

“Even if it’s covered with rust, it will remain an active duty commissioned navy ship. It’s a symbol of our sovereignty,” said the Philippine general.

Source: Japan News. 15 July 2015

http://the-japan-news.com/news/article/0002286692

Chittagong Ship breaking yard worker dies:

A ship-breaking yard worker died at a Chittagong hospital yesterday six days after he was injured as a piece of steel plate hit his head on June 30 in Sitakuna.

Ali Hossain, 22, of Noakhali was standing at the yard when a piece of the steel snapped and hit his head while other workers were pulling the plate with a steel wire at Jhuma Enterprise, said Faruk, brother and also a fellow worker of Ali.

Ali was wearing all the safety gears, Faruk added.

Source: the daily star.  7 July 2015

http://www.thedailystar.net/city/ctg-ship-breaking-yard-worker-dies-108625

GMS says 2015 will be record year for ship breaking

GMS, the world’s largest cash buyer of ships for scrapping, which has its Middle East office located in Dubai, has indicated that 2015 will likely be a record year for ship scrapping.

GMS’s founder and CEO, Dr Anil Sharma, told Maritime CEO that 2015 is on track to surpass 2012 in terms of the number of ships scrapped and total tonnage recycled.

The charge has been led by capesizes. Some 65 capesizes have gone to scrap so far this year, with Pakistan the biggest beneficiary of this bulk clearout, says Sharma.

GMS expects that more than 100 merchant vessels will be scrapped this year, which is expected to put downward pressure on steel prices, cutting into ship breakers’ profits.

Sharma says profitability for recyclers remains problematic due to fluctuations in currencies and commodity prices. The price of finished steel in ship breaking hubs such as South Asia has been impacted by cheap imported finished steel.

In less than a year, scrap prices have dropped by more than 25%, says Sharma, describing the falling commodity prices as “frightening”.

Source: Arabian supply chain.  28 June 2015

http://www.arabiansupplychain.com/article-11504-gms-says-2015-will-be-record-year-for-ship-breaking/

Shipbreaking prices sour further:

Ship scrap prices decreased again from 22 to 26 June as the South Asian monsoon took its toll on ship demolition activities.

As a result, no sales were reported except for that of a tanker that was sold for demolition in Bangladesh.

Bulker scrap prices have slipped to USD345-USD350/ldt, compared with USD350-USD370/ldt in the last two months. For tankers, they are going for USD375-USD380/ldt.

The deluge of bulkers being offered for recycling comes after the Baltic Dry Index fell to a historic low in February 2015.

The sole sale last week was that of Estoril Navigation's 1992-built LR1 product tanker Varg Star, which was sold for USD6,413,200 or USD400/ldt.

Dubai-based cash buyer Global Marketing Systems (GMS) said that renegotiations have been common as steel prices see-saw during this period, resulting in scrap yards being in no hurry to commit to tonnage.

GMS said, "The monsoon phenomenon will be an ongoing theme over the summer months, and activity, demand, and pricing should be expectedly slow as a result. As such, owners with vessels to sell should not over-estimate the market and must not rest on their laurels until vessels due to be delivered are done so - especially until the money is in the bank and the ship is safely on the beach."

Source: ihs maritime 360. 29 June 2015

http://www.ihsmaritime360.com/article/18430/shipbreaking-prices-sour-further