South Asian shiprecyclers are expecting demolition rates to stay low in the quarters to come, with weak steel demand, yard disruptions caused by the coronavirus pandemic, and no shortage of scrapping candidates.
Scrap vessel prices have fallen by over 25% to about $300 per ldt this year, with few deals done in April and May due to the lockdown measures in India, Pakistan and Bangladesh.
While the recycle market has reopened this month, offers from shipbreakers – who dismantle ships and re-sell scrap to compatriot steel mills – are still at multi-year low levels.
“Not until the first half of 2021 will we see any [rate] improvement,” Venture Green Recyclers’ director Arif Dar said in a Steelmint webinar on Thursday.
Dar, whose yard is in Pakistan, estimates that the country’s demand for long steel products has halved due to the Covid-19 crisis.
“Construction has dropped drastically…We foresee this situation to persist for at least another six to eight months,” Dar said.
With an even more pessimistic view, Bangladeshi Simni Ship Recycling Industries’ deputy managing director Sartaj M Imran said: “At least until the end of 2021, we are going to go through a very hard time.”
“The government was working on mega [construction] projects in the country…Now all the projects are shut down.”
“You can say there is no steel consumption in the country for the moment.”
Operational issues
As the Covid-19 outbreak has not abated in the South Asian countries, some travel restrictions remain in place to control the spread of virus.
Shipbreakers have not been able to run at full throttle with many workers yet to return, constraining their imports of scrap ships.
Priya Blue Industries director Gaurav Mehta said most of Indian breakers are operating at between 30% and 40% of their capacities.
“The situation is quite bad for the moment…We still do not expect the labour to return for at least a month’s time,” Mehta said.
On the selling side, Machtrans Ship Management’s director Siddharth Derashri said it remains “a nightmare” to deliver ships to the recyclers.
“The biggest challenge is the repatriation of crew,” said Derashri, echoing similar opinions to many other shipping players.
“The only option is wait and watch.”
But market sources suggest some shipowners are still keen to rid of old tonnage, with vessel earnings in many sectors depressed by the pandemic.
If willing to accept low prices, the owners can still find recyclers as long as operational issues can be resolved, according to some.
“For the first quarter, Bangladesh already bought a lot of tonnage at $400 [per ldt],” Imran said. “Now we bring in more tonnage basically to average the costs.”
