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Breakers hit the buffers in ‘lifeless’ demo market

Photo: Leela Modernized ship recycling facility - Leela yard.png
Ship recycling activity is grinding to a halt as yards adjust to a shortage of tonnage during the monsoon season and holidays in the west.

Prices have come off recent peaks in the $700s but are still significantly higher than rates that have typically prevailed in recent times.

However, firm charter markets and strong spot rates are luring owners to fix on further voyages rather than negotiate recycling deals on old vessels, according to the latest update from GMS, the world’s largest cash buyer of end-of-life ships. Ship operators are also put off by financial disruption including steep falls in Indian subcontinent currencies against the US dollar, and a shortage of local funds to open letters of credit in a timely manner, particularly large ones. Markets are continuing to drift downwards and sentiment is generally weak.

Ships already held by cash buyers now face unworkable levels and delivery terms. GMS predicted that almost every ship sold for recycling may well have to turn back to trading markets as an alternative, “so lifeless is the ship recycling industry at present”. Bleak weeks or months lie ahead for the sector, possibly lasting until the end of the year.

Bangladeshi buyers are still nominally ahead on price, with containers typically paid $590 per light displacement ton (ldt), tankers $580, and bulk carriers $570. Indian rates are around $10 lower per ldt, and prices prevailing in Pakistan are a further $10 down. Typical prices in Turkey are $260 for containers, $250 for tankers, and $240 for bulkers, GMS said.