Pakistan: Shipbreaking Industry Observes Declining Sentiments Amid Dull Demand

According to recent reports, there has been a lack of demand from the Pakistani waterfront. With breakers' inventories now heavily exhausted with no new tonnage anticipated, there is a wait and watch scenario to see if the Bangladesh market cools down and if cash buyers start to divert their unsold tonnage to WCI.

Pakistan exhibits a declining sentiment in the shipbreaking market - This week ended with no positive reports from Gadani as no new vessels have arrived at the shores. Prices for containers have been assessed at USD 420/LDT-430/LDT. Dry bulk cargo has been estimated at USD 400/LDT-410/LDT whereas rates for wet bulk cargoes have been gauged at USD 410/LDT-420/LDT.

Mini-budget in favor of shipbreaking industry - The Pakistani government did not increase import duties or taxes on ships during the mini-budget announced this week, relieving the shipbreaking industry at Gadani. Even though the budget was generally towards the positive side, and for financial markets, in particular, it is not yet sure if it will generate the much-needed stimuli to bring the recyclers back to the buying table.

The local steel industry is at a low point as a majority of the steel mills are reportedly operating at their minimum production output, highlighting the economic slowdown being witnessed across the globe since the New Year.

Pakistan's place in shipbreaking market likely to improve - According to our sources, Pakistan is expected to make a return to the shipbreaking market in the near future as Bangladesh has limited yard space left after the heavy influx of tankers towards the end of last year.

Despite the negative sentiment, some cash buyers with low tonnage in hand have shown high interest in acquiring a unit to speculate with the end users. Most of these units have been tagged for the Bangladeshi shores, but buyers are likely to turn to Pakistan and India if Bangladeshi waters fill up.

Overall in the global shipbreaking industry, negative factors dominate only four weeks into 2019. Freight rates for dry-bulk and container ships have been falling steadily over the past six months. It is expected that the market will continue in this low-spirited mood until after the Chinese New Year when it will be confirmed if the forecasted mass supply of cheap steel to the Indian Subcontinent and Turkish markets takes place, as recyclers are certainly concerned about this.