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Demolition Prices Lure More Shipowners In But Not Dry Bulk Ones

With the tanker freight market at its weakest state in years, it’s no wonder that more and more ships are candidates for scrapping. In its latest weekly report, Clarkson Platou Hellas commented that “the flow of larger tanker units remains relentless as each week brings new names into the market. Can the amount of such units be absorbed is a big question on everyone’s minds, especially as several cash buyers still hold large tanker units in their hands from previously concluded deals and yet, these vessels remain unsold. The ‘Will it, Won’t it’ long running saga from Pakistan in relation to re-opening for importing tanker units is now becoming onerous and there does appear to be so much speculation from certain cash buyers on the back of indications that the decision is imminent”.

The shipbroker added though that “the predictions that an announcement was due last week, and positive predictions too, have again proved unfounded and so the industry continues to wait with abated breath. Even if Pakistan does agree to a return to tanker imports, there is still some uncertainty that price levels will push northwards in an aggressive manner as the market is now so transparent that even on the shores of Pakistan, it is widely known of the large availability of tanker units, both now and for the foreseeable future. Also we feel, as brokers, that it will still need sometime for all parties to digest the new regulations and local custom formalities on arrival of a vessel to the anchorage and that information will not be provided overnight! As all and sundry from the Ship Recycling world (recyclers/breakers, cash buyers, brokers), Ship Owners, Environmental groups amongst other business colleagues congregate in Hamburg next week for the Annual Tradewinds Ship Recycling Conference, perhaps in addition to the usual environmental discussions and ‘spats’ that take place, Pakistan authorities may provide a timely and welcome boost to the industry players during this time. But…let’s wait and see! With all industry players gathering in one area, it could help to stimulate the market as has proven to be the case in previous gatherings and return some positive impact on the scene as at present, buyers seem to be singing from different song sheets”.

In a separate note, Allied Shipbroking added that “there was a considerable flow of demo units this past week, albeit slightly softer in volume compared to the week prior. This closed off another month, with the recycling market being driven to a considerable extent by the tanker sector, following the same pattern that was being noted at the final part of 2017. As it has already been mentioned many times, the main driver has been the poor freight conditions noted for tanker vessels. However, even with consideration to the parameters above, there is still an increasing level of speculative attitude in the market for the time being. The whole discussion referring to a potential re-opening of Pakistan for tankers has created some turbulence, whereby Cash buyers seem to be in a “hurry” to gather as many units as possible before the market catches up with the increased competition amongst buyers that would follow from a re-opening of Pakistan. Yet, high price levels that aren’t explained by the current markets’ fundamentals, can become an indicator for increased instability, as the price gap with the end buyers widens. Asymmetries and exaggerations of this kind can put the whole demolition market on a more problematic and unpredictable track, leaving many cash buyers at risk”.

Meanwhile, GMS, the world’s leading cash buyer said this week, that “the excitement being generated by an imminent Pakistani reopening for tankers coupled with soaring steel plate prices led to an unexpected market lift off this week, particularly in a previously dormant Bangladesh, which started to acquire fresh tanker units at a dizzying rate. This unexpected and sudden buoyancy from Chittagong has been driven by a short and sharp spike in plate prices (something that is not expected to last very long), whilst news of Pakistan’s (expected) reopening for tankers is sure to deprive competing neighbors of some of their regular diet of wet units. Meanwhile, there were several more (privately concluded) VLCC deals this week, taking the total number sold to well over 15 within the first two months of the year.

Additional tanker sales in both the Suezmax and Aframax sectors were also reported, in what has been another bumper week of wet sales to add to the extremely busy year witnessed already so far. The Pakistan re-opening for tankers (the order for which has been rumored to be forthcoming some time next week, to include “gas free for hot works” certificates from the last port of call) is set to ease some of the pressure on Bangladesh and India who have been struggling to take in some of these recently bullish tanker sales and Pakistan’s re-opening should boost prices as a result. Holidays have also (slightly) disrupted activity, with the recent conclusion of Chinese New year holidays last week, Holi celebrations in India this week (who have started to fall behind their sub-continent competitors once again) and the upcoming Tradewinds ship-recycling conference in Hamburg that is further set to hamper working hours, whilst bringing the shiprecycling sector together for what is usually a useful debate sprinkled with some frantic negotiating!”, GMS concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide


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