South Asia: India faces post-election slowdown, Bangladesh reels under economic challenges
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This week, the ship recycling markets in South Asia saw mixed trends. Offers for containers and tankers remained stable, but political and economic developments influenced activities in India, Pakistan, and Bangladesh. In India, post-election uncertainty led to a temporary slowdown, though market activities are likely to pick up soon.
In Pakistan, Gadani recyclers exited the market amid monsoon and Eid celebrations, influenced by earlier letters of credit (L/C) easing and a stable rupee. Bangladesh faced economic difficulties with the new budget, depreciating taka, and falling steel prices, impacting the ship recycling sector.
INDIA
This week, India's ship recycling market was significantly impacted by political uncertainty following the election. The Indian rupee dropped to INR 83.50 against the US dollar, reflecting decreased investor confidence. Concurrently, plate prices fell by about $10/tonne (t) and continued to decline. The market reaction is largely attributed to concerns over potential political instability affecting economic policies.
However, India's economic fundamentals remain strong compared to Bangladesh's struggling economy. Once political conditions stabilise, economic stimuli and government spending are expected to boost the ship recycling market, with the government's business-friendly approach likely to restore confidence and stimulate growth.
The total tonnage received at Alang Port was around 23,614 LDT this week.
BANGLADESH
This week, Bangladesh's ship recycling market encountered significant difficulties with the introduction of the FY 2024-2025 budget. The budget, totalling BDT 797,000 crores (approximately $6.78 billion), reflects only a 4.6% increase over the previous year, which is insufficient to counteract the high inflation rates. The Bangladeshi taka's intentional depreciation has further complicated economic conditions, adding pressure to an already strained ship recycling sector. Local steel plate prices fell by $9/t, which severely impacted the operational margins of local recyclers. Additionally, the BDT nearly breached 118 against the US dollar, ending the week at BDT 117.45.
Despite these economic setbacks, Chattogram reported a surprising number of arrivals, with 12 vessels and nearly 95,000 LDT docking, although no market sales were confirmed. The conservative fiscal policy and limited measures to boost domestic revenues or manage foreign currency reserves did little to reassure the market. Consequently, local buyers continued to lowball ship prices, seizing opportunities to secure deals at lower costs.
While the Indian ship recycling market remains relatively stable post-election, Bangladesh's sector continues to struggle with fundamental economic issues. The budget's failure to address these critical areas means that higher interest rates and tighter controls on foreign currency reserves are likely, further restricting the ship recycling industry's growth and stability.
The total tonnage received at Chattogram Port was around 93,870 LTD this week.
PAKISTAN
This week, Pakistan's ship recycling market saw significant developments. Gadani recyclers exited the ship recycling scene after efficiently consuming last year's quota, coinciding with monsoon season and Eid celebrations. The easing of Pakistan's L/C restrictions in January 2024 initially boosted purchasing power, strengthened by a firmer Pakistani rupee and stable steel plate prices in the mid-to-high $700/t.
Despite this, local steel plate prices remained flat at around $705/t, the highest among major ship recycling destinations. The rupee fluctuated slightly, from PKR 278.70 to PKR 278.06 against the US dollar, leading to no market or private sales into Pakistan this week. As Gadani's anchorage received its last vessel, the market saw few meaningful offers, with some recyclers hoping to secure tonnage below $500/LDT despite higher competing market prices. The current shortage of tonnage, alongside high freight rates, indicates the market needs to seize upcoming opportunities, even at higher costs.
The total tonnage received at Gadani Port was around 5,778 LDT this week.
