South Asia: Ship recycling markets see mixed trends as India thrives, but Pak, Bangladesh struggle

• Strong demand for HKC-compliant vessels boosts Alang
  
  
• USD shortages, low steel demand weigh on Chattogram
  
  

This week, the South Asian ship recycling markets showed mixed trends. Alang's market witnessed a surge in deals, driven by demand for vessels compliant with the Hong Kong Convention (HKC), while Pakistan continued to face challenges due to economic instability and low supply. Bangladesh's market struggled with weak demand, US dollar shortages, and falling steel prices, though some optimism was present due to new scrap arrivals.

India's Alang boosted by strong demand for HKC-compliant vessels

Last week, Alang's ship recycling market saw a positive trend with increased deals for oil rigs, tankers, and fishing vessels. Rising demand for HKC-compliant ships fuelled this growth, and the momentum is expected to continue into early 2025.

India's ship recycling sector is well-positioned for the future, with most yards being HKC certified, giving it an edge in eco-friendly recycling. As the HKC takes effect next year, India is set to lead in South Asia, while Bangladesh and Pakistan are still upgrading their facilities.

However, despite India's financial stability and growing US trade, the weakening rupee and fluctuating steel prices have created uncertainty. The sharp drop in ship recycling prices from USD 600/light displacement tonnage (LDT) to around USD 450/LDT in 2024 has led to cautious sentiment, with hopes for a global economic recovery to boost prices above USD 500/LDT.

The total tonnage received at Alang Port this week was 45,853 LDT. In the previous week, the port recorded trades of 37,020 LDT.

Pakistan struggles amid economic instability, pressure to ensure HKC compliance

This week, Pakistan's ship recycling market struggled, with low vessel deliveries and limited supply, making 2024 one of the slowest years in a decade. Increased competition from India and Bangladesh further weakened Gadani's market performance.

Financial struggles, inflation, and delayed IMF loan talks have caused economic instability in Pakistan, reducing government spending on ship recycling. As a result, many plots in Gadani remain unused, and the market has remained stagnant throughout the year.

A US dollar shortage and high steel plate prices have dampened demand in Pakistan's ship recycling market. With the HKC set to take effect in six months, Gadani's shipyards must invest in upgrades to meet environmental standards or risk closure by 2026.

No tonnage was received at Gadani Port this week, and the port has remained empty for a prolonged period.

Bangladesh market struggles with low demand

This week, Bangladesh's ship-breaking market faced challenges due to a lack of financially capable buyers, weak demand, and ongoing US dollar shortages. Many buyers could not open large-value letters of credit (LCs) for big LDT vessels, particularly dark fleet units, while the weak domestic economy and falling steel plate prices (at $521/LDT this week) added to the pressure.

Additionally, the struggling domestic economy, a depreciating taka, and an ongoing USD shortage limited trade and reduced demand for larger vessels, contributing to a sluggish market. While the arrival of 43K LDT of scrap, including a large gas carrier, offered some optimism, low steel demand and prices continued to hinder further market improvement. As a result, Chattogram's yards are unlikely to see significant improvement until 2025.

The total tonnage received at the Chattogram Port this week stood at 43,936 LDT compared to 24,960 LDT in the previous week.