Global ship recycling tonnage falls 12% y-o-y in H1CY'24; Bangladesh remains top destination

The global ship-breaking market remained in deep waters in the first six months of 2024. Total tonnage sunk 12% to 1.07 million light displacement tonnage (LDT) compared to 1.21 million LDT recorded in the same period of 2023.

Bangladesh remained the largest ship-breaker globally in terms of tonnage similar to last year. However, it concluded the first half of the year with total tonnage dropping over 14% to 551,060 LDT against 641,197 LDT in H1CY23. It also led in terms of vessels demolished, at 79 units compared to 93 in H1CY23, down by 15% y-o-y.

India, on the other hand, slipped 25% to 362,120 LDT in H1CY24 versus 485,066 LDT in corresponding period last year. Along with this, the number of ships demolished too dropped by 27% to 48 from 66 in H1CY23.

Surprisingly, Pakistan processed nearly double tonnages in H1CY24 to around 154,431 LDT, marking a significant jump of 88% in comparison with 82,172 LDT recorded in H1CY23. The number of vessels recycled in Pakistan surged remarkably by 383% to 29 from a mere 6 in the same period last year.

Prices slide y-o-y

Demolition scrap prices fell y-o-y. Container prices in India fell by 7% to $536/LDT in H1CY24 from $575/t reported in same period last year. Bangladesh witnessed the highest drop of around 10% to $550/LDT in H1 from $609/LDT from the same period last year.

Pakistan's container prices witnessed slight drop of 2% $536/LDT from $549/LDT in H1CY23.

Factors impacting tonnage

India navigates uncertain waters: In India, the year started with moderate trade activity, which showed improvement as time progressed. However, competition from neighboring countries like Bangladesh and Pakistan, along with election-related uncertainties, created a challenging environment. Despite these obstacles, the market demonstrated resilience, with Alang's ship recycling lanes remaining active and bustling with arrivals. Rising steel plate prices and competitive offers kept Alang attractive, even as political and economic uncertainties loomed.

In July, the market is likely face setbacks with a weak rupee and lackluster government support, leading to subdued activity.

Bangladesh faces continued headwinds: In the first half of 2024, Bangladesh's ship recycling market grappled with significant challenges. Despite some improvement in obtaining Letters of Credit (LCs), persistent difficulties for higher-tonnage vessels and a shortage of suitable ships strained the market. The situation worsened as economic pressures, including currency depreciation, high interest rates, and restrictive fiscal policies, led to reduced market activity. Falling local steel plate prices and a weak taka further squeezed operational margins, forcing buyers to lower offers below those in India. The FY 2024-2025 budget provided little relief, leaving the market under considerable strain.

Looking into July, the market's outlook darkened as it faced additional disruptions from civil unrest, communication blackouts, and adverse weather. These factors, combined with ongoing economic instability, led to a further decline in market conditions. Although there was some activity with small-LDT tonnage arrivals, the overall sentiment remained bleak, with falling steel prices and a depreciating taka underscoring the broader economic difficulties. Uncertainty and instability continued to cloud the market's prospects.

Pakistan faces mixed fortunes: Pakistan's ship recycling market saw a blend of strong performance and significant challenges. Early in the year, Pakistan managed to surpass India in pricing, driven by improved LC conditions and a surge in tonnage after the elections. However, the market faced difficulties as weak steel plate prices, a stagnant rupee, and seasonal factors, including the monsoon and Eid, slowed down activity. Fiscal constraints linked to IMF loan requirements and a restrictive budget added further pressure, leading to reduced market momentum.

Looking ahead to July, the market is expected to show resilience amid a challenging regional environment. Gadani recyclers are expected to remain selective and manage to outperform previous year's volume, supported by a slight firming of the Pakistani rupee. Despite a persistent tonnage drought and limited new arrivals, the market is anticipated to maintain a cautious optimism, holding its ground as neighbouring markets struggled. The outlook remains cautiously positive, though challenges persist.