South Asia: Challenging week for ship recycling market amid economic headwinds

The South Asian ship recycling market witnessed a challenging week. In India, Alang's ship recycling sector struggled significantly in the aftermath of the general elections and the interim Budget for FY24-FY25, which offered little hope for stabilisation. Local steel plate prices have dropped, compounded by typical monsoon season economic shifts and dwindling demand.

Pakistan's Gadani market has remained relatively steady despite regional instability, with recyclers choosing to be selective in their bids. Meanwhile, Bangladesh faces severe civil unrest impacting its economy but has managed to achieve progress in its ship recycling market with another yard gaining HKC compliance certification.

INDIA

This week, India's ship recycling market in Alang faced significant challenges. The sector has struggled to stabilise and expectations of a boost from the Budget have been belied. Local steel plate prices have been declining significantly due to low expectations from the Budget and economic shifts typical of the monsoon season.

The monsoon months usually lead to an uptick in the import of cheaper steel products to cover shortages caused by slowed cutting activities and the migration of labourers. However, this year, the lack of confidence in the Budget's outcome has dampened interest in steel imports. This, combined with a decline in demand for steel, has caused local steel plate prices to drop by about $8/t, now trading at $500/t. The Indian Rupee has also weakened, closing at a record INR 83.75 against the USD.

Despite the downturn, Alang saw an influx of reefers and trawlers from the colder northern climes, with another sub-3,000 LDT reefer awaiting delivery this week. Without significant budgetary changes, India's ship recycling market is expected to face further challenges.

Total tonnage received at Alang Port was 5,286 LDT this week.

PAKISTAN

This week, Pakistan's ship recycling market stood out amid the instability prevailing in the subcontinent. While neighbouring countries grappled with declining demand and tonnage shortages, Pakistan maintained a steady stance, especially as price levels in the region converged. With India's uncertain economic outlook, Pakistan's position has become increasingly attractive.

Despite a significant shortage of market and private tonnage, Gadani recyclers have been selective in their bids, leading to only one arrival last week and no new arrivals for nearly two weeks. This pickiness has not hindered their performance, as they have already surpassed last year's volume. Pakistani plate prices, though stable, remain significantly higher than those in India, exceeding $200/t.

Additionally, the Pakistani Rupee has strengthened slightly against the USD, closing at PKR 278. Domestic inflation continues to decrease thanks to the latest IMF tranche, helping the government manage import expenses and keep local credit lines open for Gadani recyclers. As India retreats and Bangladesh focuses on small LDT tonnage, Pakistan is poised to take centerstage for non-HKC tonnage in the coming weeks.

Total tonnage received at Gadani Port was 3,585 LDT this week.

BANGLADESH

This week has been turbulent for Bangladesh, marked by violent civil unrest and a worsening economic crisis. Deadly protests erupted due to newly imposed quotas reserving 30% of government jobs for descendants of Liberation War veterans. The government responded with communication blackouts and a curfew. After the violence had claimed over 100 lives, the country's Supreme Court on Sunday last reversed the quota ruling reserving only 5% for descendants of Liberation struggle veterans.

In the ship recycling market, a silver lining emerged as another yard received its Statement of Compliance with the Hong Kong Convention, bringing the total to five certified yards in Bangladesh. Despite this progress, the market faced setbacks as local steel plate prices dropped by $5/t, and the Bangladeshi Taka fell to BDT 117.90 against the USD. These factors led to lower offers at the bidding tables.

Total tonnage received at Chattogram Port was 19,192 LDT this week.