South Asia: Ship recycling sector improves in India, Pak; Bangladesh reels under challenges

The South Asian ship recycling sector experienced mixed movement characterised by India's resilience amid challenges, while Pakistan shows unexpected strength and Bangladesh grappled with significant struggles.

India led as the preferred destination with increased vessel activity at Alang despite fluctuating steel prices and a weakened rupee. Pakistan's market unexpectedly strengthened, surpassing Chattogram, but still faces challenges like tonnage shortages and political issues. In contrast, Bangladesh struggled significantly with low steel prices, weak demand, and economic instability hindering recycling efforts.

India gains vessel sales momentum despite volatile steel prices

India's ship recycling market demonstrated resilience, standing out in the sub-continent with its stable economy, functional LCs, and a broader range of active buyers. Despite this, market fundamentals were turbulent, with steel plate prices having dropped over $75/light displacement tonnage (LDT) since May due to political uncertainties, followed by further decline in steel prices of $6/tonne (t) recently. Additionally, the Indian rupee weakened, reaching INR 84.11 per dollar.

Alang, India's major recycling hub, saw a spike in activity, with 10 vessels totalling nearly 76,000 LDT arriving.

Although India maintained a lead with attractive pricing and diversity in vessel types, local recyclers cautiously adjusted offers below $500/LDT as they navigated fluctuating steel prices and a challenging economic landscape.

The total tonnage received at Alang Port this week was 75,673 LDT.

Pak market improves amid increased inquiries

This week, the Pakistani ship recycling market experienced an unexpected rebound, allowing Gadani to surpass Chattogram and secure the second spot in market rankings. However, the sector faced ongoing challenges including a shortage of tonnage and fierce competition from India.

Local steel plate prices in Pakistan had fallen by $14/t over a few days, while Chinese steel prices rose by $27/t. Additionally, the Pakistani rupee weakened slightly against the dollar, closing the week at PKR 277.60. Despite these fluctuations, an increase in fresh inquiries provided a glimmer of hope for the recycling market.

Political turmoil and regional crises led the Central Government to restrict large dollar transactions in anticipation of potential conflict, particularly with Iran. This decision may have inadvertently bolstered domestic conditions, maintaining steady reserves and improving market sentiment compared to neighboring countries. Yet, challenges persisted as no successful deals were made in Gadani, leaving the price benchmark for October 2024 uncertain.

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

Bangladesh market struggles, sees low demand, prices

Bangladesh's ship recycling market faced significant struggles, ranking at the bottom with domestic steel plate prices plummeting to $533/t. The local economy remained unstable, as pending infrastructure projects sat on hold and the Bangladeshi taka weakened against the dollar, closing the week at BDT 119.50, three basis points lower than in the previous week.

Slow demand for recycled steel from local ship recycling yards created a lack of trade further slowing down recycling processes. Local steel mills were not buying, which reduced interest in ships from recyclers. This was evident in the arrival of only one large LDT tanker at the port, underscoring the challenges of local demand.

The economy grappled with a shortage of US dollars and a growing trade deficit exceeding $80 billion over the past 15 years. In the third quarter, openings for letters of credit (Lc) dropped for the first time, hinting at potential restrictions on large-value LCs. This situation resulted in a steady inflow of smaller Far Eastern vessels. As a consequence, the Bangladeshi ship recycling sector was expected to remain inactive in early Q4 while Indian buyers continued to thrive with higher offers for various vessel types.

The total tonnage received at the Chattogram Port this week was 34,033 LDT.