Home / This Week / Cover Stories / Demolition market close to eruption, as owners hold out for higher prices

Demolition market close to eruption, as owners hold out for higher prices

The combination of few available ships offered for demolition and higher prices has led to a somewhat stalemate in the market, as ship owners were holding out in search for even higher prices, which didn’t come. In its latest weekly report, GMS, the world’s leading cash buyer said that “the first signs of a pushback on the (seemingly) unending firming levels started to emerge this week as a number of owners unsuccessfully held out for the coveted USD 400/LDT (or higher) in order to finalize various sales. Unfortunately, all efforts failed to materialize.

Pakistan appears to be driving the market at some of the over-zealous numbers witnessed during the recent weeks, particularly on capesize bulkers. However, even they (Gadani recyclers) were starting to baulk at some of the increasingly wild and well-above market offerings from certain cash buyers this week”, it noted.

According to GMS, “there may be a window of a few remaining weeks where pre-monsoon/forward deliveries kick in (before May ends) during which, prices and sentiments may hold. Nevertheless, the general expectation is that levels have (likely) peaked already and could likely soften going into the monsoon and summer season/the third quarter of the year. Meanwhile, the number of meaningful candidates has slowed continually and considerably of late, ever since freight rates have started to return increased earnings to owners (for the first time in years). This in turn is leading to something of a frenzy once a decent (and rare unit such as a capesize bulker) emerges for sale. Notwithstanding, there may well be a few more potential tanker candidates for sale in the coming weeks/months ahead, as sentiments and rates in the wet sector continue to dip.

The problem will be that for the larger tankers, Bangladesh may well be the only market, with Pakistan still closed for tankers and Indian buyers preferring containers and smaller LDT specialist units. Local steel plate prices remain firm across the sub-continent and the currencies, particularly in India, have enjoyed rare rallies of late, in what is, for the time being at least, an extremely healthy and buoyant segment of the shipping industry”.

 

Meanwhile, in a separate note, Allied Shipbroking noted that “its been as if the whole market has been set alight these past couple of weeks, with prices having shown a rapid increase in a matter of a few days, while we are hearing that the Indian Sub-Continent is fairly ready to break above the US$ 400/ldt barrier in even the dry bulk vessels. The main support continues to be the lack of sufficient demo candidates that are circulating the market, while appetite amongst breakers hold firm and their ability to push for such price increases has been well supported by the strong prices being seen in local steel plate prices. At the same time and having seen considerably lower supply of tonnage and feeling the pressure to conclude more vessels before the pre-monsoon slump starts, there is a considerable incentive for this level of competition amongst buyers. What is starting to become a main fear here is that given the bullish sentiment being seen, there is the slight possibility of a repeat of what happened back in 2015 right before the collapse of the market in the early summer which left a number of cash buyers with over payed purchases which drove their inevitable default to many creditors and the shutting down of a significant portion of the Indian Sub-Continents capacity for a very long time”.

In a separate report, Clarkson Platou Hellas said that “it has been yet another sober week in the market where the lack of tonnage continues to cause an eerily silence and looks set to last into the early part of the Summer with Container Panamax charter rates almost doubling since the start of the year and second-hand values continuing to firm. Therefore, the supply of Container units that had deluged the market over the past 12 months looks line it will become a distant memory. There is also a general feeling amongst Buyers that prices have now peaked with no one willing to push through the $/ldt 400 mark even though several suitable candidates that were earmarked to break this barrier were workable, but subsequently fell short. With global Iron Ore prices having weakened and additionally, Chinese steel billets also slightly declining at the beginning of the week, an edgy feel has started to creep into the current market to once again spread caution amongst most Buyers. However if the current short supply of tonnage from all shipping sectors continues, then it will become a matter of when not if the current $/ldt 400 psychological wall is broken and the once depressed recycling market of 12 months ago will finally look like it has recovered”, concluded the shipbroker.

Courtesy: Nikos Roussanoglou, Hellenic Shipping News Worldwide

Check Also

Islamic finance education in Pakistan – challenges and growth

Islamic finance education in Pakistan – challenges and growth

Islamic finance industry in Pakistan has witnessed a strong growth in Pakistan over the last …

Leave a Reply