Ship recyclers expect prices to remain firm over the coming months with steel demand remaining strong and healthy freight rates limiting the supply of ships.
Bangladesh's PHP Shipbreaking and Recycling Industries managing director Mohammed Zahirul Islam, speaking at TradeWinds Ship Recycling Forum, said he expected demand for steel from the Bangladesh construction industry to remain strong during the winter months.
Bangladesh accounts for around 34% of global recycling.
"The demand is there," he said. "Even though the banks are squeezing everything they are willing to finance recycling because there is demand for steel in Bangladesh. Banks understand the need to provide finance so construction can go ahead," he said.
JRD Industries director Sanjiv Agarwal pointed out that the recycling market is characteristically volatile and difficult to predict, which is an additional concern when paying high prices for ships. Demo prices have hit a recent high as $620 per ldt.
"We need to double the amount of money to do business. What matters is the overhang of the market crashing. Basically, your working capital doubles and your worries increase," he said.
One issue for Indian recyclers is that with so many yards upgrading to the Hong Kong Convention for the Safe and Environmentally Sound Recycling of Ships, the green premium has been lost.
GMS attorney Prachi Shah said Hong Kong Convention compliance had now become regarded as the "norm" in the country.
Although India maintains a 15% to 20% price differential with Bangladesh and Pakistan Agarwal said this premium has been "lost in market dynamics".
He said that some leading Indian yards are now targeting the "super green segment," in which a handful of shipyards, and owners, are working together on achieving standards above the Hong Kong Convention.
The segment involves dismantling ships outside the intertidal zone and could earn yards up to a $20 per ldt to $30 per ldt discount on buying tonnage for recycling, he said.
GMS's Prachi said, despite the erosion of the green premium, she viewed the move by leading shipowners to specify higher standards of green recycling as "a very positive step."
"Premium owners care about how their end-of-life vessels are recycled," she said.
