Cash buyers say the problems South Asian ship recyclers faced acquiring tonnage in 2023 are worsening as the Red Sea crisis triggers demand for more vessels and higher freight rates.
Shipowners, which shunned the low scrap price offerings coming out of the Indian subcontinent throughout last year, now have even less incentive to recycle their ships.
“An increase in the voyage routes due to the problems in the Red Sea has resulted in an increase in demand and could delay tonnage to be sent for recycling,” said Wirana in its latest market report.
Singapore-based Star Asia Shipbroking said: “This surge is expected to dissuade shipowners from selling their older vessels for recycling and [they will] continue to gauge the markets.”
Only two ships were sold for recycling in the final week of 2023.
An ultra-large reefer secured one of the higher per ldt scrap prices seen out of India in the second half of the year.
Whisper Mariner is set to receive a hefty $573 per ldt, or $4m, for the 14,500-dwt reefer Ice River (built 1985), which was reported as sold for recycling on a delivered Alang basis.
Although managed out of Greece, databases indicate that the Ice River has most recently been trading in the fleet of Swedish reefer giant Cool Carriers.
However, cash buyers described the price paid for the Ice River as an anomaly based on its high aluminium content.
More indicative of current scrap price levels out of the Indian subcontinent is the $465 per ldt that Indonesia’s Atamimi Group received for the 18,100-dwt product tanker John Caine (built 1993), which was sold to a cash buyer on an “as is” basis in Singapore.
This netted Atamimi a total of $2.2m.
Reluctant to sell
2023 was a grim year for the South Asian ship recycling sector as falling demand for scrap steel kept price offerings low across the board, especially during the second half, when they hovered at just over $500 per ldt but often dipped below that.
Strong rates in the tanker sector kept wet tonnage in the larger size sectors off the recycling beaches, while owners of bigger bulk carriers were also reluctant to sell.
Compounding matters were the severe currency and credit problems that prevented many Bangladeshi and Pakistani recyclers from buying ships. While Bangladeshi recyclers acquired a limited number of smaller vessels by paying for them outright in cash, Pakistani recyclers were absent from the market for most of the year.
Cash buyers say the problems that precluded South Asian ship recyclers from acquiring tonnage last year have yet to be resolved, and, together with the effect of the Red Sea crisis on ship availability, the early months of 2024 look set to be challenging.
