After Pakistan, Here Comes China to Shift the Market Again

May 10, 2018

For weeks, the main story in the demolition market was about Pakistan. This time around the “tune” of the market is heading further more to the East. In its latest weekly report, shipbroker Clarkson Platou Hellas highlighted this very fact, by noting that “the main talking point in the recycling world last week has been the surprise announcement that China is to cease the permitting of international flagged ships for recycling into the country from the beginning of 2019. Obviously, Chinese flagged vessels will still be allowed to be dismantled internally at the local yards but the state subsidies ended last year and therefore it is felt even Chinese flagged units will become sales candidates for the Indian sub. Continent in view of the current pricing being seen from China. The Chinese Government have, for some time now, been trying to crack down on polluters /waste producing industries and many yards have not received licences for ship recycling since these events”.

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According to the shipbroker, “in view of this, owners will have to succumb to the fact that, with the exception of Turkey, the H.K Convention approved recycling yards in Alang will have to be taken more seriously following the incredible improvements that have been made at these yards over many years and the fact that these yards now can only offer owners the only alternative at this current time for green recycling. The Indian sub-continent markets have remained stable this week after the small price corrections witnessed recently. With Pakistan once again ‘open for business’ for tanker units, the improved price levels eagerly awaited have not materialised and it would appear cash buyers with the larger tanker units in their hands have finally come to terms with this situation and are now offloading their previously acquired tankers for the best possible price they can, even at a loss. The mini budget announced earlier in the week in Pakistan confirmed initial fears that further taxes have been introduced on customs duty at around 1%, affecting the importing of ships for recycling. However, it is hoped this will not ease the Pakistani breakers appetite for tonnage and with the upcoming holy month of Ramadan nearly upon us, the usual scramble to purchase tonnage prior to this period with a temporary price surge may occur again”, Clarkson Platou Hellas concluded.

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In a separate weekly note, Allied Shipbroking said that “there was a considerable flow in demo candidates during the course of this past week , after the slow down noted the week prior. Things in the Indian Sub-Continent remain rather fuzzy for the time being, with most market participants sustaining a more conservative attitude at this point. A considerable softening in offered numbers is more obvious now, while the price gap between Cash buyers and breakers is keeping things on a “tight rope”, with breakers seemingly hesitant to offer more aggressively given the current market situation. All-in-all, given the Pakistan reopening, we haven’t yet felt the true impact in market dynamics that we were expecting a couple of months back, and the following weeks will surely prove to be a good test in order to see if there is true potential for an upward push in scrap prices is really there. At the same time the improved prices for steel products in the Far East has helped bolster things slightly and created a firm support moving forward, especially in China where we noted a fair increase in prices being quoted”, the shipbroker concluded.

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Meanwhile, the world’s leading cash-buyer, GMS, said in its report that “tanker related activity ramped up this week as Cash Buyers managed to offload part of the 10 unsold VLCCs that remain in various Cash Buyer hands, most of them into the recently opened Pakistani market. Several units were reportedly committed to Gadani Recyclers this week, however resale levels are well below Cash Buyer expectations as end Buyers remain reluctant to offer above a certain threshold (seemingly matching prices with other local recyclers) in an effort to secure a deal (or two). Presently, only a handful of open and capable (in terms of LC limits) end Buyers who are able to take in large LDT vessels / VLCCs are available in the Gadani market. This has left Cash Buyers scrambling to secure takers for their unsold tonnage at the least painful / loss making levels. Despite these odds, principals of GMS were the first to deliver and beach, not 1 but 2 tankers (including a VLCC) into Gadani after the 18 month hiatus. What is certain is that once the overflow of unsold vessels is committed to local buyers, the next batch of fixtures will likely be concluded at even lower numbers as we head into the traditionally subdued and slower summer / monsoon months. Indeed, several Cash Buyers will have learnt of the challenges and sheer time it takes to clean these large LDT tankers, FSUs, and VLCCs, given the far more stringent local restrictions in India, Bangladesh and now Pakistan. We would like to remind our readers that when gas freeing tankers, all cargo residues, slops and sludges are to be totally cleaned from all cargo and slop tanks – the usual hot works standards of ‘up to two meters in height’ is no longer acceptable in the sub-continent markets”, GMS concluded.

Nikos Roussanoglou, Hellenic Shipping News Worldwide

Source from : hellenicshippingnews

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