The last seven days have seen a historically low level of activity in the ship breaking market, IHS data confirms.
Only two ships, Glory Sun, and LPG tanker Lady Stephanie have arrived at Alang and Aliaga to be scrapped.
“From Friday 31 July to today we have seen virtually no activity,” said Paul Clemenson, senior data transformation analyst for IHS Maritime & Trade.
“There’s been almost a complete dearth of activity, which is very unusual,” he said.
A flood of cheap steel from China in particular, along with improved freight rates, and monsoon weather in the case of south Asia, have all contributed to the drop in activity.
Nikos Mikelis, ship recycling consultant and non-executive director with cash buyer GMS, told IHS Maritime that the flow of cheap steel from China has affected the market since the end of last year, but that it has not been consistent, “At times it seems to have gone down and then come back,” he said.
Ruling out prior expectations of a record scrapping year, he said, “Now the pendulum has swung and I don’t think we will get a record year.” He warned that cash buyers and recyclers are finding reasons to cancel contracts.
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“Buyers end up finding reasons to get out of their contract – if there is some anomaly or a wrong date on the contract, or a delay – any excuse to get out. Recyclers are finding reasons to refuse delivery; so somebody’s fingers are getting burned in this,” he said.
“The issue is that the market is grinding to a halt. Recyclers are losing money and they are very scared of buying. That is why prices are dropping,” said Mikelis
However, as in all crises, there is the chance that some might spy an opportunity.
“Some recyclers may think ‘this is a good low price’, and buy now, so next week we might see activity,” said Mikelis.
Scrap rates have been falling. GMS records rates from South Asia as between USD365-USD395 per LT in May, dropping to USD275-USD320 at the end of July, with rates in China and Turkey dropping from USD200-USD265 in May to USD120-USD195 on 31 July.
An IHS Maritime report on 5 August found that dry bulk scrapping surged in 1H15, when about 20 million dwt were taken out of the market. Most of the scrapped ships were Capesizes, boosting rates in that sector and also ensuring an overall marginal supply growth.
This post was sourced from IHS Maritime 360: View the original article here.
