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Shipbreaking rates continue to sink in New Year

Shipbreaking rates continue to sink in New Year
Have the ship demolition markets bottomed out? As with stock and commodity markets, it is very hard to predict the highs to which the shipbreaking market will rise, and the lows to which it will fall.

However, the fact that offers for dry cargo vessels have dropped below the $400 per ldt mark – the lowest they have been for two years – should buttress the feeling that rates have hit the trough, and that they will only improve from this point.

“There was talk of one or two units from existing cash buyer inventories being committed at such lower levels into Bangladesh,” said Dubai-based cash buyer GMS.

“However, there was some positive news to finally cheer onlookers in both India and Pakistan, with the Indian rupee gaining some encouraging ground (by as much as one percentage point) and talk in Pakistan of a 15% duty set to be imposed on incoming steel from abroad.”

GMS felt that the impact of the duty in Pakistan would have positive reverberations around the sub-continent and could spur governments in India and Bangladesh into action as well. “The feeling is that markets may have bottomed out, but this has been said several times in the previous months already, only to see prices fall lower still,” the cash buyer remarked.

All the ship recycling markets on the Indian subcontinent showed a bearish undertone, with bids in India being the best at $425 per ldt for tankers and $400 for dry bulk vessels. Rates were $5 per ldt lower than the Indian levels in both sectors in Bangladesh, while Pakistani bids were a further $5 per ldt adrift from those in Chittagong.

The only demo market where there was optimism was Turkey, where the main fundamentals of pricing seemed to be relatively stable, while several buyers appeared keen to purchase quality units.

Cash buyers were beginning to consider Turkey as a genuine alternative to the Indian subcontinent, willing as they were to compete at prices well above existing market levels. Steel prices had so far not had any significant fluctuations during the first half of January 2015.

There were just a couple of deals struck in the first fortnight of the New Year – both of dry bulk vessels to India, sold with the inducement of a good quantum of bunkers on board.

The 8,085 ldt handy bulker ABM Leader fetched a reasonable $425 per ldt, with 125 tonnes of bunkers thrown in, while the 9,438 ldt panamax bulk carrier The Benefactor was committed for an even more impressive $435 per ldt, with 340 tonnes of bunkers as part of the package deal.