South Asia: India's ship recycling market turns active despite broader economic challenges

The South Asian ship recycling market witnessed varied trends across countries last week. The Indian market displayed notable resilience despite broader economic challenges, with robust sales in Alang defying expectations. In contrast, Pakistan's market faced a downturn, struggling with rising income taxes, a weak PKR, and limited supply. Bangladesh also had a challenging week, as most tonnage was redirected to India, exacerbated by unfavourable fiscal policies and devaluation of the BDT.

INDIA

Last week, India's ship recycling market demonstrated resilience amid broader economic challenges. Local steel plate prices dropped by another $5/t, and the Indian rupee continued to weaken, dropping to INR 83.5 against the US dollar. Despite these economic pressures, Alang's ship recycling sales remained robust, defying expectations.

Noteworthy transactions included the Korean-built reefer TROPICAL SKY (5,175 LDT), which fetched an impressive $555/LT LDT, and the MSC GRACE F, which sold for $545/LT LDT. These high prices, especially under current conditions, highlighted the market's strength and optimism. Alang's anchorage has become busier than that of Bangladesh, making it a focal point for global ship recycling activities. Ship owners and cash buyers are increasingly looking to Alang for recycling their vessels.

This robust activity is driven by positive sentiment about future infrastructure projects, despite the floundering domestic fundamentals and anticipated reductions in tonnage. The Indian ship recycling community remains optimistic about the future, banking on upcoming projects to sustain the industry. As a result, India's market is expected to end 2024 on a positive note, with domestic recyclers continuing to perform well despite the challenging economic conditions.

Total tonnage received at Alang Port was 28,627 LDT this week.

PAKISTAN

Pakistan's ship recycling market showed a downturn despite an optimistic budget for FY24-FY25. Pakistani recyclers, having already met and exceeded last year's volumes in the first half of 2024, are not seeking fresh tonnage. Factors such as rising income taxes, a predicted drop in tonnage supply next month, and crisis in the Red Sea are contributing to a negative outlook.

The Pakistani Rupee (PKR) remained weak, nearing PKR 279 against the US dollar, and local steel plate prices stayed low at $706/t, with no incentive for buyers to increase levels. Additionally, supply was limited to HKC-only vessels and poor-quality units, leading to an empty local anchorage for the second consecutive week. The market in Gadani is expected to have a quiet summer, with competing markets being more aggressive in securing available tonnage.

BANGLADESH

Last week was challenging for Bangladesh's ship recycling market, with most tonnage being redirected to India due to higher offers and a preference for HKC-compliant recycling. Bangladeshi recyclers had to settle for lower quality, smaller LDT vessels, mainly Chinese-built and Far-Eastern owned.

The situation worsened with unfavourable fiscal policies, including the intentional devaluation of the Bangladeshi Taka (BDT) to nearly BDT 117.50 against the US dollar, impacting forex reserves. Local steel plate prices also declined amid the Eid holidays further dampening activity. The recent Budget has added to the woes, imposing duties on incoming vessels with excess FO and LO, increasing costs for local yards.

The total tonnage received at Chattogram Port was around 13,846 LTD this week.