The demolition market has dropped substantially this week with prices falling by up to $40 per ldt and all sales negotiations grinding to a halt.
This sharp and sudden drop has come despite market sources suggesting earlier this month that demolition prices could pass $500 per ldt on a regular basis as steel shortages spur recycling interest.
Cash buyer GMS, in its latest weekly report, described the reversal as being “shocking and unexpected”.
It said that many end buyers had “booked themselves with decent tonnage” and some of the post new year demand had therefore started to subside.
“This has subsequently left several cash buyers holding some of their high-priced inventory once again, and they will certainly be hoping for offers to bounce back to somewhere near previous levels, in order to simply break-even on their units,” GMS said.
Athenian Shipbrokers said in its latest demolition report that recyclers in Bangladesh, who have been the most prolific demolition buyers so far in 2021, lowered their demand “as reaction to the higher prices, preferring to wait and watch until the prices fall to a satisfactory level for them”.
Inherent volatility
Scrap broker Ed McIlvaney told TradeWinds that people tend to forget that recycling is a commodity market so when steel prices suddenly cut back internationally, domestic markets reduce them even further for local recyclers.
McIlvaney said this is “not the first and won’t be the last time we see such rises and falls following each other in a short space of time”.
Last Friday TradeWinds reported that Polaris Shipping had sold its last two vintage ore carriers for scrap. The 298,000-dwt Stellar Pioneer and Stellar Topaz (both built 1994) were reported sold “as is” in Labuan for $430 per ldt.
In spite of this week’s sudden and strong fall in scrap prices, it is still being suggested that the Polaris deal did materialise.
The only other significant deals to appear on broking reports this week were a pair of handymax bulkers from Indonesia’s Karya Sumber Energy, the 47,300-dwt KT 02 (built 1998) and 45,200-dwt KT 05 (both built 1998), which were sold to Bangladesh at between $478 and $480 per ldt, together with Sealink Shipping’s 49,000-dwt Anda Raya (built 1996), which went for $445 per ldt.
Shipbroking sources in Singapore suggest that the deals for the two Karya Sumber Energy bulkers may have been done before the market began to drop, while the Sealink deal was a better reflection of current pricing levels, which on Thursday were still said to be in decline.
