South Asian ship recycling market faces challenges amid economic, political instability
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The South Asian ship recycling market experienced a turbulent week, with varying fortunes across India, Pakistan, and Bangladesh. India's market remained stagnant despite significant infrastructure project announcements, hampered by declining steel plate prices and a record-low Indian rupee. Pakistan maintained its top position with strong vessel prices but faced a severe tonnage shortage and economic uncertainties. Meanwhile, Bangladesh grappled with political instability, affecting its ship recycling activities despite continued domestic arrivals.
INDIA
India's ship recycling market remained stagnant this week despite the supportive announcement in infrastructure projects in the recent budget. These projects, now deprioritised and unlikely to be executed soon, have not impacted Alang's ship recycling sector. Local fundamentals saw local steel plate prices drop from $545/t to $498/t, while the Indian rupee hit a record low, breaching INR 83.81 against the US dollar.
With domestic infrastructure projects sidelined, the market faces a tonnage drought exacerbated by international issues. Rising competition from Pakistan and limited incoming tonnage, mainly fishing and HKC units, have kept Alang afloat. However, the market struggles with a lack of domestic deliveries due to geopolitical events affecting freight rates.
Overall, India's ship recycling market is hindered by both domestic and international challenges, with a significant bounce back unlikely until at least fourth quarter (Q4).
The total tonnage received at Alang Port was 15,935 LDT this week.
PAKISTAN
Pakistan's ship recycling market maintained its top position this week, offering strong vessel prices nearing mid-$500/LDT. However, Gadani buyers faced a severe tonnage shortage, with no fresh arrivals for nearly four weeks, leading to an empty port report. Despite being the highest-priced recycling destination, lack of available vessels left recyclers unable to capitalise on their optimism and cash.
Domestic inflation is stable, and local steel plate prices remain the strongest in the ship recycling world. The Pakistani rupee fluctuated between PKR 277-279, ending the week at nearly PKR 278.50 against the US dollar. Gadani recyclers' varying price offers in hopes of securing the right-priced units allowed local buyers to cherry pick amid the tonnage drought.
Indian recyclers stayed busier with specialty and HKC units, leaving Gadani buyers struggling at bidding tables despite having cash. Concerns about dwindling US dollar reserves and potential letters of credit (LC) restrictions added to the uncertainty. Nonetheless, expectations for a better Q4 remain, with hopes that improving plate prices might allow Pakistan to capture more recycling tonnage from India in the near future.
Notably, there were no new tonnages reported at Gadani Port this week.
BANGLADESH
Bangladesh's ship recycling sector struggled this week following the civil unrest and now Prime Minister Sheikh Hasina's resignation resulting in a political unrest.
This instability made it difficult to contact local buyers, banks, agents, and authorities, complicating deal finalisations and vessel deliveries. Nonetheless, Bangladeshi recyclers continued receiving various domestic arrivals, from small 1,600 LDT vessels to larger 9,000 LDT bulk carriers. However, local buyers are nervous about the country's economic future, with the taka fluctuating and local steel plate prices declining slightly.
Despite these challenges and the lowest prices in the sub-continent ship-recycling markets, ship owners and cash buyers were still selling to Chattogram. The sustainability of this trend is uncertain as the situation continues to deteriorate. The total tonnage received at Chattogram Port was 20,579 LDT this week.
