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Bullish start to the year for Indian shipbreaking

Bullish start to the year for Indian shipbreaking
The shipbreaking market in India has turned distinctly bullish in the new year amidst rising steel prices and a dearth of available ships. Recyclers are looking for junk ships as increasing freight rates force owners to delay scrapping.

In general, 5,000-10,000 ldt units are becoming the preferred range of choice in the world’s largest ship cemetery in Alang due to their lower overall cutting times, shifting the steel off yards and arranging for the import of new units.

“The problem is that freight rates for most sectors (other than perhaps containers) remain firm and the number of available candidates has slowed markedly from the same period last year,” said the Dubai-based GMS, the world’s biggest cash buyer of recycled ships.

“Nevertheless, 2014 is still expected to be a bumper year. Last year saw almost 1,200 vessels scrapped; and whilst 2014 might not emulate that, a huge number of over-aged vessels with SS/DDs due remain and newbuilding orders continue to deliver and outbalance the global fleet size.”

Bearing in mind the extreme fluctuations on both currency and steel prices in India during 2013, end buyers prefer not to hold large, expensive inventories on their plots for too long. As a result, capacity too remained encouraging as almost half of all yards remain empty, with local recyclers abstaining from taking vessels altogether.

Average prices in India rose to $415 per ldt for bulk carriers and to $445 per ldt for tankers. Prices were $5 per ldt cheaper in Bangladesh for both categories, while Pakistani offers were a further $5 per ldt behind.

The sole market sale for the week concerned the older, 5,335 ldt Japanese cement carrier Fujisan Maru, which fetched an impressive $441 per ldt. The smaller ldt would have drawn in plenty of buyers along with the highly valued range of equipment, including cement processing plant, contributing to the decent price on show.

Pakistan found it difficult on the whole to compete with their Indian and Bangladeshi counterparts. This may be due to a lack of their favourite larger-ldt tanker candidates, but at present, end-buyers are lacking the initiative or aggression to compete on market tonnage.

Finally, China has been seeking to acquire vessels from the international market once again in the build-up to Chinese New Year holidays at the end of January. However, with a difference of almost $100 per ldt with India -- $95 per ldt cheaper than India on tankers and $75 per ldt behind on bulkers – the Chinese are unable to compete.

“It would be difficult to persuade owners not to make the journey across (for vessels positioned in the Far East) or for cash buyers to take vessels ‘as is’ with an intention for a final voyage to the Indian sub continent,” GMS remarked.

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