Outlook Hazy on Demolition Front
Outlook Hazy on Demolition Front
Opinions differ over the consequences of market upheaval.
Opinions are split over the direction of demolition prices given the ongoing scrapping hiatus in Bangladesh and ethnic tensions in Pakistan.
Anil Sharma of Global Marketing Systems (GMS) and Tahir Lakhani of Dubai Trading Agency put contrasting spins on what the market may expect.
Sharma sees a potential short term spike in prices to around $500 per ldt if the price of steel holds or strengthens and Bangladesh reopens for business in the next few weeks. Bangladesh has been absent for the past six months after the imposition of stricter environmental regulations.
“It will not last long but I can see it happening,” said Sharma of a possible uplift in prices, which have recently seen bulkers and tankers securing around $440 per ldt, although some have gone for much more.
Lakhani, however, says he doubts $500 per ldt can be achieved in the foreseeable future given examples of India paying as low as $425 per ldt. He questions market chatter of Bangladeshi breakers rushing to replenish stocks. It may be open initially for 10 or so ships but recyclers are unlikely to act like fools, he says.
Demolition men:
Cash buyers attending a private luncheon to mark the launch of tradeWinds Ship Recycling Forum scheduled for 1-2 march 2011 in Dubai.
From left, Ali Lakhani, Dubai trading Agency, Steve Wansell, Mideast Shipping & Trading, Anil Sharma, Global marketing Systems (GmS), mujibur Rahman milon, Silvia Shiptrade (S) Pte Ltd, Tahir Lakhani, Dubai Trading Agency, and Briac Beilvert, eckhardt marineUnconfirmed reports say the environmental authorities in Bangladesh may have authorised as many as 12 breakers to resume activities but with a long list of conditions attached.
Lakhani says that until a ship is beached again in Bangladesh, that market should be seen as closed. The market has also been knocked by scores of deaths due to the ethnic violence in Pakistan. Lakhani points to reports of 350,000 tonnes of material lying at Gadani because buyers are not coming forward following the troubles and collections have halted.
GMS talks in its last report of activity in Pakistan drawing to a standstill, with most vessel buyers lying low and many uncontactable. Despite positive sentiment in India, the market earlier this week was said to be falling, despite the approaching Diwali holidays, prior to which prices normally rise. Money, it is claimed by one source, is being sucked out of Alang by big share issues in India that offer investors better returns.
Meanwhile, some cash buyers are said to have been selling at a loss, including one vessel bought for $448 per ldt “as is” in Fujairah but sold this week on a delivered basis at $440 per ldt. Examples involving other cash buyers have also surfaced.
“The market is very bad at the moment and I feel it will remain bad,” claimed one cash buyer. Others are less worried. India is said to have picked up various tankers originally bound for Bangladesh and that have been gas freed for hotwork to comply with the new regulations in India.
The extra cost is being borne, it is said, by either owners or cash buyers.
Meanwhile, Sharma says 2010 has turned out to be a much slower year for demolition than 2009 when, he says, around 1,000 vessels went to the torch. Last year saw a lot of containerships recycled, whereas this year it has been tankers.
The more muted supply in 2010, especially in the dry market, is because of charter rates remaining relatively firm, says Sharma. Also, owners who bought older tonnage at high prices have been reluctant to sell.
Sharma believes some owners have held on to ships, especially tankers, in anticipation of Bangladesh reopening.
He estimates that this year between 700 and 800 vessels will be recycled.
Lakhani says the yearend total could be as low as 600 if Bangladesh does not reopen. He puts 2009’s total at closer to 700 to 800 vessels.
Sharma and Lakhani joined various other cash buyers, brokers, lawyers and the International Maritime Organisation (IMO)’s Nikos Mikelis at a luncheon at London’s Lanesborough Hotel to mark the launch of TradeWinds’s Ship Recycling Forum to be held in Dubai on 12 March 2011.
