GMS: Markets see a tightening of oil supplies

This in turn saw WTI crude oil fixtures surge by about 1.8% by Friday, settling at a firmer USD 71.30 per barrel, marking its highest since early November. As Western nations contemplate the imposition of further sanctions on Russian and Iranian exports and dark fleet tankers, logistics in the wet sector are expected to take a hit in the coming weeks, driving tanker rates higher and further depriving the ship recycling sector of units. In the interim, the Baltic Exchange’s main sea freight index eased for the fourth straight session this Friday, falling close to 0.5%, its lowest since July 2023. This has assisted the ship recycling sector with the supply of tonnage recently, fueling its survival into early 2025.

As we approach the final weeks of 2024, compared to earlier in the year, there has been a noticeable uptick in the markets and a more positive outlook for the ship recycling sector in the Indian sub-continent. News of fixtures, bolstered by firming levels, has kept recyclers busy taking deliveries at various waterfronts over recent weeks. While the market is not yet at the coveted USD 500/LDT mark, it has come out of a period in Q2, Q3, and early Q4 when recycling levels were at their lowest this year. Moreover, rather than attempting to break the next high-priced fixture, ship owners and cash buyers should reflect on the fact that these are still very strong prices.

Meanwhile, unlike the unfolding developments in the tanker sector, supply from other sectors is expected to remain steady or likely improve into 2025. Despite trading markets performing impressively and driving the global fleet to its highest average age, increasing newbuild constructions in 2025 should phase out older units faster, ensuring a steadier recycling supply. Additionally, despite China’s stimulus announcements promising stronger economic measures, Capesize bulkers managed to lose further ground, and all eyes are now on Trump’s incoming tariffs, which will take effect after January 20th, including those targeting China.

In the interim, as global economies stabilize, the U.S. Dollar strengthens across the recycling board. Meanwhile, local steel plate prices in both China and India declined in unison this week, further exemplifying the ongoing problem of cheaper steel being dumped into sub-continent markets. This has seriously affected sub-continent steel prices for much of the year, despite punitive tariffs being in place. As recycling yards in Bangladesh and, especially, Pakistan remain in limbo, focus should now be on upgrading facilities by June next year to comply with the Hong Kong Convention. With most yards in India already compliant, regional competitors must undertake improvements or risk missing out on recycling tonnage entirely. At the far end, Turkey, with its legal framework in place for the safe recycling of ships, continues to struggle for tonnage due to its own constraints. 2025 is gearing up to start with a whimper rather than the traditional bang.

For Week 50 of 2024, GMS Market Rankings / vessel indications are as below:

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