South Asian ship recycling markets continue to grapple with economic challenges

• Alang struggling due to weak currency, declining steel prices
  
  
• Bangladesh market cools down amid surging inflation
  
  

The ship recycling markets in South Asia are facing significant challenges in January 2025. Alang is struggling with a weak Rupee and declining steel prices, while Pakistan's market has remained stagnant due to economic instability and a lack of deliveries. Bangladesh is facing cooling demand amid inflation and VAT hikes, with vessel offers declining and market sentiment weakening.

Alang struggling with currency depreciation, market uncertainty

In January, Alang faces challenges due to the weak Rupee against the strengthening US Dollar, leading to lower prices from recyclers. However, India's financial strength ensures stable interest rates and a steady flow of US Dollars and LCs. This stability has allowed Alang shipyards to prepare for HKC regulations, reducing economic concerns and resulting in fewer renegotiations.

Steel prices have declined despite steady trade with domestic mills. Domestic mills have been the only active players recently, and the ongoing decline in Chinese plate prices continues to negatively impact the Indian market by undercutting local inventories.

Vessel prices remain stagnant, but India remains the preferred destination for tonnage, particularly those requiring SoC-certified HKC recycling yards. Expectations for positive news after the Budget are high.

The total tonnage received at Alang Port this week was 57,610 LDT, up from 18,514 LDT in the previous week.

Pakistan: Stagnation driven by economic crisis, lack of ship deliveries

Pakistan's shipbreaking market remained at a standstill, continuing its halt for the past four months. High inflation, a severe shortage of Letters of Credit (LCs), and government restrictions on US Dollar transactions have left the sector stagnant. Gadani's anchorage remained empty, and recyclers are struggling as the market has been inactive since Q4 2024.

Economic instability, pending loans, and uncertain World Bank aid have contributed to stagnant plate prices, which remain the highest in the ship recycling industry. With the Hong Kong Convention (HKC) deadline approaching in mid-2025, Pakistan's shipbreaking sector faces a tough future unless recyclers invest in yard upgrades.

Gadani Port has seen no vessel arrivals this week, continuing its prolonged period of inactivity.

Bangladesh: Economic slowdown, reduced vessel activity

The Bangladeshi shipbreaking market showed signs of cooling this week, continuing to face challenges due to economic instability and inflation. The government's VAT hike raised concerns about worsening inflation and reduced activity in steel and ship recycling. Yard upgrades and vessel negotiations remain impacted.

Vessel offers have declined, bringing Bangladesh closer to Pakistan's struggling levels. The Taka weakened against the US Dollar, while steel plate prices held steady at $529/LDT, offering limited stability. The potential impact of Biden's COSCO sanctions on the inflow of wet units remains uncertain, but Chattogram recyclers have avoided the empty port scenario seen in Gadani.

Despite a few notable sales, including a VLCC, several unsold vessels are still searching for final destinations before the typical Chinese New Year slowdown halts activity.

The total tonnage received at Chattogram Port this week stood at 6,418 LDT, up from 1,969 LDT in the previous week.