GMS: Conflict and tensions keep impacting ship-recycling

The only uncertainty that prevails at this moment is just how soon the Middle East plunges deeper into war, dragging the rest of us and our lives with it. Covid logistical drawbacks created untold financial doom for world economies, exacerbated by a vessel jamming up the Suez Canal and incessant delays due to increasing strikes on merchant ships in the Red Sea lanes over the last year, leading everyone to wonder just “what the time is.”

This week, Yachir “Yahyah” Sinwar, the leader of Hamas, was killed in an encounter with the IDF, which was followed by an Iranian counter-attack whereby a single missile drone was fired from Hezbollah territory in Lebanon, striking PM Benjamin Netanyahu’s home in Northern Israel. This event sees Iran lay the groundwork for an inevitable war by striking the leader of a free nation. As U.S. forces increase their attacks in Yemen targeting Houthi bases and Israel readies for its strike against Iran, surprisingly, this week, crude oil dropped more than 8% in value since early September trading figures, on the back of OPEC and the IEA (International Energy Agency) lowering their respective output forecasts, notwithstanding the unfolding crisis in the Middle East.

On the ship recycling front, weak pricing, damp demand, and dithered sentiments characterized another lackluster week in the Indian subcontinent, as sales ground to a virtual halt this week, with activity registering at some of the lowest levels witnessed for nearly a decade. Levels declined by over USD 100/LDT since the peaks of 2024, with a majority of marginal sales reliably taking place below USD 500/LDT on nearly all vessels and in all markets. Bangladesh and Pakistan remain at the bottom of the subcontinent rankings due to economic deficiencies that are causing available L/Cs to dither and a mounting disinterest in negotiating even when opportunities arise, while India pigeonholes its collection of HKC sales from MSC over recent weeks, even though highly sought-after containers are below the USD 500/LDT mark on a delivered basis. Finally, Turkey remains marooned with weak sentiments, weaker supply, and lingering Lira and steel concerns of their own.

Despite Indian and Pakistani currencies remaining relatively unchanged this week, both Bangladesh and Turkey recorded noteworthy declines. Local steel plate prices flatlined in Bangladesh and Pakistan, with India partially mimicking their performances, and Chinese plate prices continued to fall. Could this result in further declining steel levels from India and Pakistan? Certainly, this would be the case in India, given that prevailing tariffs on cheaper Chinese steel are doing little to control the violence in Indian steel. Bangladesh has yet to settle post-PM Hasina, with the interim government yet to deliver any clear direction for the country or the economy, hampering the resale of recycled steel from local yards and further curtailing domestic output. Pakistani and Indian recyclers, plagued by cheap Chinese steel over the past few months, have chosen to abstain from buying, fearful of further market falls amidst the ongoing wars. As freight markets continue to perform unseasonably well—even if dry bulk has cooled off lately—it seems there will simply not be enough supply for the recycling markets through the remainder of the year, if not beyond well into Q1 2025. This may give subcontinent markets the time needed to stabilize until the expected deluge of tonnage eventually transpires.

For Week 42 of 2024, GMS Market Rankings / vessel indications are as below:

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