South Asia: Ship recyclers adopt wait-and-see approach amid lack of sales, economic headwinds
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This week, the ship recycling markets in India, Pakistan, and Bangladesh faced significant challenges and market participants adopted a wait-and-see approach. In India, post-election uncertainty and pre-Budget concerns led to cautious bidding in Alang, with falling steel plate prices and a weak rupee contributed to the lack of sales. Pakistan has been hit with new budget duties, leading to decreased vessel prices and subdued activity in Gadani despite an unexpected uptick in vessel arrivals. Meanwhile, Bangladesh experienced a lacklustre week in Chattogram, with no new sales heard amid declining steel prices and weak interest from recyclers.
India
The Indian ship recycling market faced another challenging week marked by post-election uncertainty and pre-Budget concerns that led Alang recyclers to adopt a cautious approach. This caution is expected to persist throughout the current financial year with the Budget set to be placed in Parliament on 23 July. Local steel plate prices fell by $4/t, while the Indian rupee hovered just above INR 83.50 against the US dollar.
These economic pressures have dragged vessel prices down despite India nearly surpassing Bangladesh in market rankings recently. Current steel plate prices are around $508/t and vessel offerings remain above breakeven, hinging on a favourable Budget outcome.
With a dearth of tonnage to bid on, no sales were recorded in Alang this week. Local arrivals at the port were minimal, with only a couple of sub-3,000 LDT reefers. As vessel prices declined by about $25/LDT, the market remains in a wait-and-watch mode, with the outlook for the coming weeks dependent on the Budget's impact and potential price adjustments.
Total tonnage received at Alang Port was 4,717 LDT this week.
Pakistan
The Pakistani ship recycling market experienced a challenging week with recent Budget measures imposing unexpected duties on the sector leading to an anticipated 2% decrease in vessel prices and a further drop in local offers from Gadani by $10/LDT. Key domestic fundamentals remained weak, with local steel plate prices stagnant at $706/t and the Pakistani rupee depreciating before settling at PKR 278.60 against the US dollar.
Despite these adversities, Gadani saw an unexpected arrival of a sub-4,000 LDT container, defying the prevailing negative sentiment. Nonetheless, vessel offerings from Gadani recyclers remain subdued, making it the lowest-priced destination compared to competing sub-continental markets. As the monsoon season continues, a quiet third quarter (Q3) is likely for Gadani, mirroring trends in Bangladesh. With last year's tonnage largely consumed and freight rates expected to dip in Q4, Pakistani recyclers remain cautious, waiting for the right opportunities to secure deals at bargain prices.
Total tonnage received at Gadani Port was 3,585 LDT this week.
Bangladesh
The ship recycling market in Chattogram, Bangladesh, has seen another lacklustre week, with no new sales and limited interest from local recyclers. This stagnation is due to several ongoing challenges. Domestic steel plate prices have fallen by $4/t and the Bangladeshi taka remains weak at BDT 117.40 against the US dollar. This economic weakness is compounded by concerns over the country's dollar reserves, crucial for local recyclers who rely on letters of credit (L/Cs) to finance ships.
Despite six vessels arriving at Chattogram Port this week, half were under 2,000 LDT, signalling a weak market. As freight rates remain strong, recycling prices in Chattogram continue to decline from earlier peaks, making it challenging for sellers to accept lower offers. Consequently, sales are expected to remain slow in the coming weeks.
Total tonnage received at Chattogram Port was 22,602 LDT this week.
