A widening gap between ship recycling markets across the Indian subcontinent is showing that local yard appetite, financing conditions and available capacity are increasingly influencing vessel values independently of regional steel-price movements, according to Wirana Shipping.
In Bangladesh, the shortage of recycling candidates and strong demand from yards are encouraging recyclers to bid above the levels supported by local steel-market fundamentals. The number of facilities holding a Document of Authorisation to Conduct Ship Recycling (DASR) or Conditional DASR has risen to 39, increasing competition for the limited tonnage entering the market.
Only a small number of dry, wet and offshore vessels were offered during the past week. Despite this limited supply, a dry bulk vessel was concluded for delivery to Chittagong at higher price levels. Bangladesh’s local steel market reopened after the holidays with a subdued start, although steel plate prices increased by USD 2/MT and local scrap rose by USD 6/MT.
Conditions in Pakistan moved in the opposite direction. Weak domestic demand and the availability of imported ferrous material from Europe and Iran contributed to a USD 27/MT fall in local steel plate prices. Ship recyclers subsequently reduced their offers by approximately USD 15–20/MT, while interest in the limited dry bulk candidates being circulated remained weak.
Rakesh Khetan (pictured), CEO of Wirana Shipping, said: “Ship recycling is not moving as a single regional market. Bangladesh recyclers are bidding above local steel-market fundamentals because tonnage is scarce and yard appetite is strong, while Pakistan is being pulled in the opposite direction by weak steel demand and abundant imported material.
“For shipowners, this means that destination, timing and local capacity are becoming as important as headline steel prices. The strongest offer may come from the market where recyclers have the greatest need to secure tonnage, rather than from the destination with the strongest underlying steel fundamentals.”
India occupies a steadier position between the two markets. Local steel plate prices declined by USD 18/MT during the festive period, while finished-steel prices fell by between USD 10/MT and USD 14/MT. Nevertheless, Indian recyclers maintained their offers at broadly unchanged levels as they continued to seek suitable vessels.
LNG and tanker candidates were circulated during the week, although their locations and the difference between Indian and Bangladeshi offers make sales to Chittagong more likely. Tighter liquidity in India is also increasing borrowing costs, adding another consideration for recyclers seeking to remain competitive.
Wirana expects overall recycling supply to remain slow in the immediate term. However, steam-turbine LNG vessels and smaller dry bulk ships could provide the next source of recycling candidates as charter-market conditions change.
The divergence between Bangladesh, Pakistan and India illustrates why shipowners should assess more than regional steel-price movements when considering an end-of-life sale. Yard demand, access to finance, available capacity, vessel location and delivery costs can all materially affect the final outcome.