Petrobras has sold one of its larger floating production, storage and offloading vessels for recycling, but the deal provides little consolation to ship-starved recyclers on the Indian subcontinent — it will be scrapped in Brazil.
The Brazilian oil major cut the South Asian ship recycling nations out of the picture when it first invited offers for the 280,000-dwt FPSO Petrobras XXXIII (built 1978) last September.
The tender documents for the former VLCC stipulated the mandatory use of a dry dock for green recycling, with the work to be carried out in a Brazilian shipyard.
A vessel of this magnitude could have significantly alleviated the demand pressure on Hong Kong International Convention-certified shipyards in India, which are often faced with a shortage of ships. These shipyards, recognised for their commitment to safe and environmentally sound recycling of ships, are crucial hubs for the routine recycling of FPSOs and other large offshore assets by numerous oil majors.
Indian ship recyclers, according to the latest market reports published by cash buyers, are struggling to raise their price offerings to levels attractive enough to convince any shipowner to recycle.
Dubai-based cash buyer GMS noted that prices being offered out of Alang are lower than in Bangladesh and Pakistan.
Local steel plate prices in India have fallen by $3 per tonne due to weak demand and a glut of local scrap, while global scrap steel prices have increased by $10 to $13 per tonne, according to Wirana Shipping Corp.
“Traders are not keen to book imported scrap at higher prices,” the Singapore-based cash buyer said.
Despite this, GMS added, India’s ship recycling sector remains relevant because it has greater availability of local recyclers with workable letters of credit to provide the necessary financial framework needed to facilitate prompt delivery.
Singapore-based Star Asia Shipbroking said it has become increasingly clear that the sector in India is evolving in a green direction, with a trajectory similar to that of Turkey today.
“For Alang’s recyclers, the only glimmer of hope lies in securing pure green recycling that adheres to environmentally friendly standards, in order to sustain the industry’s viability,” said Star Asia managing director Rohit Goyanka.
The only owner to make use of Alang’s green recycling capabilities last week was MSC Mediterranean Shipping Company, which sold the 1,837-teu container ship MSC Uma (built 1998) to a hand-picked facility for enhanced Hong Kong Convention-compliant recycling at $528 per ldt, or $5.5m in total.
Pakistan gets its groove back
In Pakistan, the ship recycling sector has experienced a notable resurgence following the International Monetary Fund’s executive board approval of an immediate transfer of around $700m for Pakistan, with prices being offered out of Gadani Beach surpassing those of India and Bangladesh.
“The previously encountered challenges with the opening of letters of credit have now eased somewhat, prompting recyclers facing a shortage of ships to adopt a more optimistic outlook,” said Goyanka.
The past week has seen one scrap sale to Pakistan.
Chinese owner Sea Justice Ltd, a company affiliated with Glory Ships, sold the 35,200-dwt general cargo ship G Harmony (built 2005) to a Gadani recycling facility.
Although pricing details for the deal have yet to be disclosed to the market, Best Oasis indicated that pricing levels out of Pakistan for container and general cargo ships were in the region of $535 per ldt.
The G Harmony’s impending demise comes as its owner continues to fight a legal battle over collision damage with Greece’s NGM Energy, a fight that TradeWinds recently reported was shifting jurisdictions from Singapore to China.
GMS is bullish about Pakistan’s prospects.
“Pakistan seems to have come storming back into the picture this week, with an increasing demand and far more competitive pricing being tabled, both of which have invariably placed this market atop the pile of the subcontinent ship recycling pool,” it said.
Pakistan could provide stiff competition for recyclers in Bangladesh when it comes to buying smaller vessels for which financing and credit are easier to obtain, it added.
Vessels reported sold for recycling at Chattogram in Bangladesh over the past week included Magsaysay Maritime’s 519-teu container ship General Romulo (built 1998), sold for an undisclosed price, and Duta Shipping International’s 16,350-gt ro-ro Duta 1 (built 1991), sold for $500 per ldt, or $2.95m.
Several market reports indicated that Winning Shipping sold the 176,300-dwt bulk carrier Sunny Conakry (built 2002) to cash buyers for close to $11.5m on an “as is” Singapore basis.
However, TradeWinds understands that the ship has been acquired by GMS-affiliated shipowner Lila Global for further trading.
GMS cautioned that available demolition candidates remain severely lacking and, as the industry will soon enter the Chinese New Year holidays when activity traditionally slows, it may be weeks before more prospective vessels are made available.
