Limited recycling supply could get a brief respite in the coming weeks from a weakening second-hand interest in older vessels and softer demand for steam turbine LNG ships. Both of these factors will encourage these ships being sent for end-of-life disposal, according to Wirana Shipping.
The prolonged shortage of vessels entering the ship recycling market could get a breather, with Wirana Shipping forecasting a comparative improvement in recycling supply led primarily by the dry bulk and LNG sectors.
In its latest Demo Market Report & Market Outlook, Wirana said the circulation of recycling candidates improved during the past week, with a mixture of tanker, dry bulk and LNG vessels coming to market. While overall supply is expected to remain slow to moderate for the next couple of weeks, the company believes availability could subsequently improve on a comparative basis, particularly from dry bulk and LNG.
A significant factor will be the changing dynamics of the second-hand market. Wirana noted that second-hand activity in dry bulk remains focused primarily on modern eco tonnage, with hardly any interest being shown in older vessels mainly due to the upcoming increased requirements on environmental compliances. This could leave owners of ageing, less-efficient ships with fewer attractive opportunities to sell for further trading and potentially make recycling an increasingly viable exit strategy.
Hitesh Vyas, Vice President Middle East and Green Recycling Coordinator at Wirana Shipping
Hitesh Vyas, Vice President, Middle East and Green Recycling Coordinator at Wirana Shipping, said: “For some time, strong freight and second-hand markets have enabled owners to continue trading older vessels rather than considering recycling. We are now beginning to see signs that this dynamic could change, particularly where second-hand buyers are concentrating on modern, more efficient tonnage.
“If demand for older vessels continues to weaken, owners will increasingly have to assess whether there is sufficient value in continuing to trade or attempting a second-hand sale, compared with taking advantage of the recycling market. We believe dry bulk and LNG could be among the first sectors where this translates into an increase in recycling candidates.”
The shift would come at a time when recyclers across the Indian Subcontinent continue to show strong appetite for available vessels. In India, improving steel market conditions have increased buyer confidence, with local steel plate prices rising USD 31/MT over the past five weeks. Wirana said Indian recyclers are now willing to increase their offers by an indicative USD 10/LT LDT, with further improvements possible for suitable tonnage.
Pakistan's recyclers are also showing strong interest in available dry bulk vessels and a willingness to offer above their prevailing price levels, while Bangladesh saw dry and tanker candidates receive a good response from buyers during the week
Wirana expects recycling supply to get to moderate level in the immediate term with dry bulk and LNG vessels expected to be the principal contributors in available tonnage.
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