South Asian ship recycling markets struggle amid cheaper Chinese steel influx
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South Asia's ship recycling markets remained stagnant this week amid the influx of cheaper Chinese steel imports. In India, weak demand, exacerbated by the monsoon, also hindered recovery. Bangladesh too faced a subdued market amid regulatory challenges, with no significant improvements since last week. Meanwhile, in response to signs of a slowdown, Pakistan dropped prices to the lowest levels possible to give itself a competitive edge in the sub-continent.
Global steel prices are expected to drop due to weak demand from China's struggling property sector and a slowdown in US manufacturing. These factors will lead to continued downward pressure on ship-breaking scrap prices.
India
India's ship recycling market remained unstable this week. Local steel plate prices struggled against cheaper Chinese steel imports, undermining the profitability of recycled ship steel. This made Alang's buyers cautious about further market declines and prompted them to avoid making firm offers.
The ship-breaking market at Alang continued to suffer due to the sluggish economy and lack of intervention from the new government, despite a slew of infrastructure projects being announced in the FY'25 Union Budget.
Moreover, this week, the Indian rupee fell to a record INR 84 against the US dollar, and local steel plate prices dropped to $485/t. These declines could spell disaster for the ship-breaking market at Alang, as it is unsustainable for Indian recyclers to pay above market levels.
Alang's buyers also faced tough competition from Pakistani ones, who were undercutting Indian prices amid fluctuating vessel availability and high freight rates. Considering the current market scenario, September looks grim for the Alang ship-breaking market.
The total tonnage received at the Alang Port this week was 16,253 light displacement tonnes (LDT).
Pakistan
Pakistan's market has been deliberately lowering its prices, placing itself firmly at the bottom of the sub-continent ship recycling ranking. Buyers in Gadani were frustrated with the influx of cheaper Chinese steel, similar to the situation in India. This issue has significantly impacted the smaller Pakistani market, leading to increased complaints among Gadani recyclers.
Additionally, given that Pakistani steel plate prices dropped by $2/tonne (t) this week, recyclers were reluctant to make serious offers due to higher steel plate costs compared to competitors. Moreover, the Pakistani rupee slightly depreciated to PKR 279 against the US dollar. This made Gadani recyclers apprehensive about competing with Turkish offers.
Notably, no tonnage was received at the Gadani Port this week.
Bangladesh
This week, Bangladesh's ship recycling market struggled with instability amid ongoing floods and a lack of effective governance. The 'crawling peg' system led the taka to fall to a record BDT 120 against the US dollar. However, the Bangladeshi steel market remained relatively stable, with local steel plate prices holding steady.
The ship-breaking market has been hit hard since the start of the political upheaval, with local steel losing about 16% of its value due to halted recycling activities and reduced steel production. Flooded highways have prevented the movement of recycled ship steel to domestic mills, leading to scrap inventory build-up at yards and decreased steel output.
The Central Bank of Bangladesh is relaxing dollar restrictions and boosting imports of essential goods and raw materials, possibly due to the recent loan approval by the International Monetary Fund (IMF). Local ship recyclers hope that these changes will lower overall costs and improve the availability of funds for recycling activities.
Additionally, Bangladeshi authorities have mandated that all incoming vessels for recycling must have IHM Parts I, II, and III on board for inspection by local authorities.
The total tonnage received at the Chattogram Port this week was 33,913 LDT.
