4 July (Lloyd's List) -STRONG shipping markets are continuing to restrict the flow of ships for recycling as few shipowners are willing to sell their ageing tonnage for scrap in a period of relatively high earnings.
According to Lloyd's List Intelligence data, recycling volumes in gross tonnage terms in the first half of 2024 are down by 28% year on year. The year 2023 itself saw the lowest levels of ship recycling since 2005.
Without normalisation of the Suez Canal route and a consequent end to diversions of ships via the Cape of Good Hope, the chief driver in pushing up charter and freight rates across most of the key shipping segments, this year looks set to be the lowest for vessel scrapping in 19 years.
A total of 164 vessels arrived at recycling centres during the first half of 2024 with a combined gross tonnage of 2.6m. This compares to 3.6m gt, provided by 182 ships, reaching ship recyclers in the corresponding period in 2023.
Only two cargo carrying vessels were reported as sold for recycling in the past week. These were the China-owned 525 teu containership Far East Grace (IMO: 9422574) that was reported by cash buyer Wirana Shipping to have been sold to Pakistan-based recyclers for $515 per light displacement tonne. And Chinese owners are said to have sold the 48,000 dwt handysize bulk carrier Kmax Pro (IMO: 9149378) on an “as is” basis with handover at a Malaysian port. No price was reported for this sale.
Cash buyer GMS reports a “paucity of viable candidates” for end buyers across all recycling markets in the Indian subcontinent and Türkiye.
“Vessel availability is expected to coincidentally take a hit as Israeli strikes against Hezbollah rebels in the north and US forces engaging Houthi rebels in the South/Red Sea lanes should create further delays for commercial traffic,” said GMS.
“Should these strikes continue unabated, freight rates are not only expected to hold or get firmer, but the strikes could squeeze supply even more.”
GMS argues that this summer is an opportunity for Indian subcontinent recyclers to digest vessels that have been delivered over recent weeks and “even offer above market levels to fill dormant plots at an operational loss, should the need arise”.
Recycling in the first six months of 2023 was led by the general cargo sector with 47 ships recycled, according to Lloyd’s List Intelligence data. This was followed by containerships with 34 vessels and the bulk carrier segment with 29 ships recycled.
Just 13 tankers have been recycled so far this year. With the exception of one suezmax tanker, one aframax and a handysize product tanker all tanker recycling sales have been for vessels of below 20,000 dwt. No tankers have arrived at recycling centres since May.
Some 51% of ships, based on gross tonnage, went to Bangladesh recycling beaches in the first half of the year. Higher prices, compared to India and Pakistan, being offered there attracted 67% of tonnage in June.
Nevertheless, Wirana Shipping says that demand for recycled steel from steel mills is reducing with local scrap prices having reduced by $5 per tonne in the past week.
“It should be noted that ship recyclers (in Bangladesh) are already working in a very difficult business environment due to already increased costs, difficulty in obtaining foreign exchange, and the weakening exchange rate.”
Wirana Shipping notes a similar downward trend in the Indian steel market but despite the downturn in the local steel market, prices offered by ship recyclers have seen little reduction because of the slow supply of candidates for recycling.
It said that only a few ship recyclers in Pakistan are looking to purchase fresh tonnage.
“There was a slow start to the Pakistan local steel market after Eid holidays. There has been a lower demand in the steel market but whether this is because the market has not fully resumed will be clear next week. Very hot weather conditions are also not helping the market.”
