According to GMS’ latest report, despite a strong start to 2025, the outlook for the first seven weeks of the year has been unexpectedly gloomy.
Compounding market uncertainties took center stage this week with President Trump’s uncalculated tariff wars sending economies into turmoil, unintentionally benefiting the U.S. Dollar amidst a crisis still unfolding. The dollar declined against nearly all major ship recycling destinations, except Turkey, where it dropped nearly 0.5%, hitting an all-time record low. While some tariffs have already taken effect and others are still in the works, the ongoing global inflationary explosion seems poised to escalate.
This has even led to a tempering of oil prices, with the barrel falling further amid news of ongoing efforts for a Trump-Zelenskiy and Trump-Putin meeting to end the Ukraine war. Oil ended the week at USD 70.7/barrel, as charter rates reflected the unfolding situation, with the Baltic Dry Index reporting a drop early in the week, only to end slightly higher.
Despite this, the supply of tonnage for the ship recycling markets remains steady, with fresh arrivals earmarked for anchorages this week. The knock-on effects of the trade wars have been particularly felt in the ship recycling markets, notably in India.
Despite Prime Minister Modi’s visit to the U.S. to meet President Trump and ensure no tariffs would disrupt the ongoing cooperation between the two nations, the 25% tariffs on Chinese steel and aluminum products are already destabilizing the recycling markets. It remains uncertain where much of the cheaper steel surplus will end up, further damaging ship recycling prices.
Downward pressure on prices has been relentless since the start of the year, with the ongoing poor performance of key fundamentals pushing levels lower since USD 600/Ton was achieved in January 2024. Steel plate prices across the board have flatlined, with prices in India falling more than USD 11/Ton over the past two weeks, offering little relief for prevailing offerings.
Last year, both India and Pakistan were affected by cheaper Chinese steel imports, which undercut local inventories and caused steel markets to collapse. Although new duties have been introduced by both governments to curb the effects of this cheaper steel, there is still considerable uncertainty about how the latest round of tariffs will impact the ship recycling industry.
The recycling markets have already deteriorated by nearly USD 30/LDT this year, a decline that seems likely to continue. Despite a strong start to 2025, with numerous LNGs and at least ten Panamax bulkers from the Chinese/Far Eastern markets concluded for recycling, the outlook for the first seven weeks of the year has been unexpectedly gloomy.
This could potentially be a landmark year for ship recycling, as yards in Bangladesh and Pakistan continue upgrading to HKC standards ahead of the HKC’s entry into force post-June 30th of this year. Pakistan ended the week with its only delivery of the year.
