As the Indian currency regained the ground lost in the second fortnight of January, to trade again in the respectable range of INR61 against the dollar, after briefly touching INR63, end buyers of scrap ships rushed back to the table seeking to acquire any available vessels on offer.
After a remarkably bullish start to the year, demand had tailed off as end buyers chose to wait and watch market developments before committing on new tonnage. Following the rupee’s recovery, demand surged again for all types of units in both Alang and Mumbai, with local sentiment pushing prices to some previously unthinkable levels.
Clean tankers attracted bids of $465 per ldt from India, with marginally lower levels seen from Bangladesh and Pakistan, while general cargo vessels were being quoted at $430 per ldt in India, $425 per ldt in Bangladesh and $415 per ldt in Pakistan.
“There are plenty of open buyers with yard capacity in the sub-continent barely half-full,” remarked Dubai-based cash buyers GMS. “Almost all types of vessel are in demand with a particular preference, perhaps, for mid-sized 7,000-14,000 ldt vessels, favoured due to the lower overall cutting time, in light of the constant volatility being seen in all markets.”
Nevertheless, no market sales were reported. Despite cash buyers holding onto a number of unsold units (particularly panamax sized container vessels committed for huge prices in earlier weeks), there has not been the substantial supply of tonnage that many had expected from the market in January.
With 16 vessels at anchorage in Chittagong, it has been a busy tide of deliveries and beachings in Bangladesh in the first week of February. Steel prices actually gained ground by as much as $10 per ldt, wiping out the previous week’s losses in the process.
There was little activity from China, whose bids were approximately $100 per ldt lower than those from India. The onset of the Chinese New Year holidays from 30 January meant that a vast number of Chinese workers would depart for their hometowns from the large cities and shipyards.
It is now clear that the Chinese move, in the dying weeks of 2012, to provide subsidies – to the tune of a premium of RMB750 ($124) per gt, to be provided to Chinese flagged vessels that are recycled at domestic yards in North and South China – is unlikely to have any major impact on junk ship yards in India.
Bangladesh and Pakistan, however, could witness an impact as fewer old Chinese ships are expected to make their final voyage to their yards. There is still insufficient supply to satisfy the voracious demand, but if freight rates continue to slide, all this could change.