An influx of cheap steel from overseas has prompted Bangladesh to effectively close its ship-recycling industry.

The Bangladesh Ship Breakers Association (BSBA) told breaking yards not to sell any of their inventory to steel mills following price drops of nearly $100 per tonne in June.

Mills are now able to buy cheaper imports from overseas, undercutting recyclers.

Events in Bangladesh have softened scrap numbers across the board, with Clarksons Research estimating a VLCC is now worth $570 per ldt for demolition in India.

This is about $25m, but is 16% lower than in early May.

“Low steel demand in China has resulted in increased exports to Bangladesh, and the price of imported scrap steel is now significantly lower than the cost of importing ships for recycling,” Clarksons Platou Securities said.

“Ships are still in demand in India and Pakistan but, with monsoon rains affecting the Indian subcontinent, demand is expected to remain low until after the monsoon season.”

Vessel cash buyer Best Oasis said: “Slow construction activities and heavy rainfall in many parts of Bangladesh have led to a decrease in end-user buying interest. Mills have been offering attractive discounts to boost sales.”

Best Oasis said there remains a significant shortage of tonnage in the recycling market.

No big rises imminent

But the buyer warned that the prospects of significant rises in offers for ships appear slim.

Demolition broker Ed McIlvaney said the situation in Turkey is much the same as it is in the Indian sub-continent, but the fall in prices has not been so severe.

“All the local mills are able to secure steel products far cheaper by importing from other countries who appear to be dumping cheap products in the hope of boosting their own economy,” McIlvaney said.

“How long these cheap imports will be available is unknown.”

But reports suggest China is considering stockpiling more steel in local facilities for domestic use in the near future.

It is believed Russia is also one of the providers of cheap exports, McIlvaney said.

“With the dramatic shortage of tonnage and [there] being very little, if in fact any, likelihood of shipowners currently showing any willingness to accept the reduced levels on offer from the end receivers, the imminent future looks extremely bleak for the recycling sector,” he said.

In June, 12 tankers of 704,000 dwt were demolished, as well as 22 other ships of 115,000 dwt, for a total of 819,000 dwt.

The six-month total is 258 ships of 9.1m dwt. In the same period of 2021, the figure was 437 vessels, or 13.4m dwt.