South Asia: Ship recycling market witnesses dynamic trend w-o-w, India secures a container deal
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The South Asian ship recycling market experienced a dynamic week, with notable fluctuations and developments in India, Pakistan, and Bangladesh. Political shifts, economic policies, and market conditions played crucial roles in shaping the sector's performance. In India, cautious optimism prevailed post-elections as current government's third term began, signalling potential stability despite fiscal uncertainties. Pakistan's market faced a standstill due to stringent fiscal measures aimed at securing IMF loans, impacting vessel acquisitions and pricing. Bangladesh encountered significant challenges with weakened bidding appetites and restrictive financial policies, compounded by an unsupportive budget.
INDIA
This week, India's ship recycling market has been marked by cautious optimism following the conclusion of the national elections and the Prime Minister's swearing-in for the third term. The current government's retention of power, albeit in a coalition without a parliamentary majority, has injected a sense of uncertainty regarding the forthcoming fiscal policies. The upcoming budget on 22 July is eagerly anticipated, as it will outline the government's economic strategy amidst coalition dynamics. While some fear reduced private-sector investments, the general expectation is that new economic projects will bolster India's global economic standing. Despite this, the sector witnessed significant activity with MSC selling the MSC TIA II for a notable $570/LDT, signalling strong confidence among Alang recyclers. However, the Indian Rupee's (INR) depreciation against the US dollar and a drop in local steel plate prices by about $9/t reflected the market's volatility.
The total tonnage received at Alang Port was around 41,630 LDT this week.
PAKISTAN
This week, Pakistan's ship recycling market has experienced a cautious standstill amid the government's recent fiscal measures aimed at securing additional IMF loans. The newly announced FY24-FY25 budget has raised taxes, a move intended to bolster state revenues but likely to deepen public discontent. Despite inflation easing to 11% by May 2024 from a high of nearly 40% in April 2023, the financial sector remains strained. The restrictive approval of LCs since early 2023 has redirected foreign currency reserves away from ship recycling, significantly impacting vessel pricing and acquisitions.
This week saw no new arrivals in Gadani, with the only vessel being delivered last week. The Pakistani Rupee (PKR) firmed slightly by 0.6% against the US dollar, ending at PKR 279.97, while local steel plate prices held steady at $706/t. Despite the uncertainty, Gadani Recyclers have already received 20 vessels this year, indicating a cautiously stable outlook for the immediate future.
BANGLADESH
This week, Bangladesh's ship recycling market faced significant challenges as local appetites for bidding weakened, compounded by a lack of supportive policies in the recent budget. The domestic construction and infrastructure sector, heavily reliant on ship recycling, received no clear incentives, dampening market sentiments. Tightened restrictions on the issuance of LCs and other financial instruments further strained the sector. The Bangladeshi Taka (BDT) weakened against the US dollar, closing the week at BDT 117.50 and briefly surpassing BDT 118.10, signalling economic instability. Local steel plate prices dropped from $590/t, likely due to the upcoming Eid holidays, allowing the market a respite. The budget introduced tax increases on bunkers, impacting vessels with significant fuel quantities onboard. As the market braces for a potentially poorer Q3, the immediate outlook remains bleak with only one small LDT bulker arriving in Chattogram and few candidates available for recycling.
The total tonnage received at Chattogram Port was around 15,188 LTD this week.
