South Asia: Ship recycling market struggles amid declining steel prices

• Pak mills more keen on cheaper Chinese billets
  
  
• Credit issues may halt port arrivals in Bangladesh
  
  

The South Asian ship recycling markets struggled this week, with declining steel prices in India and Bangladesh negatively impacting profitability. Additionally, currency depreciation in India and Pakistan strained financial viability. Meanwhile, economic restrictions in Bangladesh left local recyclers, known as Chattogram choppers, facing losses. While some activity was noted in Pakistan, overall engagement remained low.

Declining steel tags hinder profitability in India

India continues to lead in ship recycling, but a $13/tonne (t) drop in steel tags due to declining Chinese prices is impacting Alang. Steel prices are just under $470/t, which has affected the profitability of recent high-priced purchases. With few buyers active, that too with bids below $500/t, shipowners and cash buyers are frustrated as demand typically rises before Diwali.

The Indian rupee is under pressure at around 84.10 against the US dollar, affecting vessel prices. However, falling dry bulk freights have led to many ships being redirected to Alang, making it the busiest port this week for recycling.

The total tonnage received at Alang Port this week was 43,171 light displacement tonnage (LDT).

Pak market faces pressure amid limited activity

Pakistan's ship recycling market saw limited activity this week, with only one Gadani recycler purchasing a 22,000 LDT bulker. Challenging conditions emerged, as local mills were reluctant to procure material due to cheaper Chinese billets undermining the prices of recycled ships.

The market is expected to lag behind India, with stagnant local steel plate prices and a weak Pakistani rupee failing to improve against the US dollar. An investigation into the mismanagement of over $400 million in IMF aid complicated matters too, despite China's promise to assist Pakistan.

Rising fuel prices also strained the economy, even as Pakistani expats sent back nearly $7 billion in remittances. With restrictions on large US dollar transactions via letters of credit, the ship recycling industry is on track for its second-slowest year in over a decade, likely remaining inactive until January 2025.

Notably, no tonnage was received at Gadani Port this week.

Bangladesh slows down on economic turmoil

Bangladesh's ship recycling market faced a slowdown this week, with local steel plate prices dropping by $7/t after a brief rise. Despite a slight strengthening of the Bangladeshi taka, economic restrictions hurt demand, leaving the Chattogram choppers struggling with losses from earlier high-priced purchases.

Sellers from the Far East are now considering redirecting their products to western markets such as India and Pakistan due to poor local conditions. Issues with obtaining workable letters of credit and unpaid loans from the previous government are exacerbating the situation. Additionally, the discovery that influential groups misused funds has raised concerns about the depletion of domestic reserves.

As the government restructures debt to avoid defaults, restrictions on new loans are increasing; consequently, with all recent ship deliveries completed, Bangladesh may face an empty port next week, even as dry tonnage imports into India and Pakistan improve.

The total tonnage received at the Chattogram Port this week was 12,141 LDT.