Sales of ships for demolition slumped from 6 to 10 July as Greece’s financial crisis and China’s stock market crash made scrap yards unwilling to acquire tonnage.
Bulkers, especially, had a hard time attracting buyers due to the ongoing deluge of such ships being sold for recycling.
The Baltic Dry Index’s slump to a historic low in February and the slow market recovery are encouraging shipowners to part ways with unprofitable vessels.
As a result, scrap prices of bulkers have fallen to USD325-335/ldt, compared with USD330-340/ldt from 29 June to 3 July.
In Bangladesh, an ample supply of ships combined with difficulty in securing letters of credit have prevented ships from being sold.
Dubai-based cash buyer Global Marketing Systems (GMS) said, “Many banks are refusing to sanction letters of credit due to the perilous state of the industry. Moreover, as with India, there are questions over the financial security of even some of the better buyers in Chittagong.”
However, some cash buyers are still speculating on an eventual market recovery, resulting in 1983-built Handysize bulker Merry Ocean fetching USD1.89 million or an unbelievable USD360/ldt, a deal GMS claimed would result in losses for the shipowner or cash buyer.
Merry Ocean’s 220 tonnes of leftover bunkers resulted in the higher price when it was sold for recycling in India.
“The one encouraging factor saw the Indian rupee maintain its reasonable rate at about INR63 to the US dollar, although most connected to the industry expect the currency to depreciate given the current global economic conditions,” said GMS.
“The fear is that an import of cheap Chinese steel will flood the market again, resulting in the inability of end users to shift their high-priced inventory from their yards quick enough – something that has already seen several high-profile recyclers forced out of business.”
In Pakistan, the imposition of USD10-15/ldt in taxes on ships, and the fact that yards are full with bulkers, have deterred recyclers from buying ships.