South Asian ship recycling markets grapple with instability, declining offers

This week, the South Asian ship recycling markets have navigated through turbulent conditions. In India, declining steel prices and a weakened rupee have led to a disappointing performance, despite significant activity at Alang. Pakistan's Gadani recyclers have taken a highly selective approach, maintaining high bids amid an empty port and rising steel prices. Meanwhile, Bangladesh's ship recycling industry is struggling with political instability, resulting in fluctuating steel prices and an uncertain future. Despite these challenges, Bangladesh has managed to secure some tonnage, positioning itself strategically as neighbouring markets grapple with their own difficulties.

India

India's ship recycling sector faced a challenging week, dropping to the bottom of the subcontinent rankings. Alang buyers encountered low levels, exacerbated by a continued sharp decline in steel plate prices, which fell by an additional $13/tonne (t) this week. The Indian rupee hit a record low of INR 84.16 against the US dollar before closing the week slightly firmer at INR 83.95, further dampening local confidence and demand.

Despite the market downturn, Alang's anchorage remained active, with over 60,000 LDT arriving, primarily from vessels nearing the end of their operational lives and no longer receiving survey extensions.

Mediterranean Shipping Company (MSC's) strict adherence to the HKC-only policy ensured a steady flow of business to Alang, especially with container vessels. However, many recycling plots in Alang remained underutilised, operating at reduced capacity due to unsustainable local offerings. The sector is grappling with the realities of a declining market, and as a result, renegotiations for incoming vessels seem likely in the near future. The total tonnage received at Alang port this week was 60,219 LDT.

Pakistan

Pakistan's ship recycling sector exhibited a cautious yet strategic approach this week, with Gadani recyclers becoming increasingly selective in their offerings. Despite declining levels in India and Bangladesh, Gadani buyers maintained higher bids aligned with local fundamentals, ensuring competitive offers for any vessel of interest. However, this selectiveness has led to an empty port in Pakistan for the second consecutive week, as the types of vessels arriving in neighbouring markets such as reefers, HKC-only containers, and non-ferrous ships have not matched Pakistani interests.

Local steel plate prices in Pakistan surprised the market by rising to $735/t by the week's end, up from $706/t, indicating potential strength in the domestic market. The Pakistani rupee also showed resilience, ending the week slightly firmer at PKR 278.35 against the US dollar. Despite the limited number of recycling candidates due to strong freight markets, Gadani's cautious stance might lead to renegotiations on incoming deals, as recyclers operate on tighter budgets. However, given the current market dynamics, any such renegotiations are expected to be minimal. Notably, no new tonnages were reported at Gadani port this week.

Bangladesh

Bangladesh's ship recycling sector had a tumultuous week, marked by significant political instability following the resignation and departure of Prime Minister Sheikh Hasina. The ensuing chaos has cast a shadow over the country, with uncertainty surrounding the new interim government's policies and priorities. The domestic steel market reflected this instability, with steel plate prices dropping to $555/t and the Bangladeshi Taka fluctuating wildly against the US dollar. Despite these challenges, a few resilient buyers managed to secure tonnage, keeping Bangladesh relevant in the market.

While the future remains uncertain, Bangladesh's ship recycling sector may find some stability as it continues to lead in acquiring geographically suitable tonnage, even as India's market weakens and Gadani recyclers remain selective. The total tonnage received at Chattogram port this week was 24,977 LDT.