GMS: Ship recycling market struggles in times of conflict

As GMS notes, there is clear and imminent danger unfolding across the Middle East this week. Various Iranian proxies seem to have risen in unison against Israel. Growing unrest in Jordan is evident as Jordanians vow to join the Muslim Brotherhood in defiance of Israel’s ongoing incursions into Gaza. Additionally, the Houthis in the South, likely emboldened by their Jordanian counterparts, launched a Hypersonic Ballistic missile early Sunday. This missile traveled from Yemen into the heart of Israel (about 1250 kilometers in under 11 minutes) before Israel’s internal Air Defense System near Ben Gurion Airport tracked and shot it down just outside Tel Aviv.

An already defiant and determined Israel, having nearly wiped out Hamas from Gaza and now focusing on Hezbollah in the North, will likely deliver a violent response to this volatile aggression from the Houthis. Israeli Prime Minister Netanyahu himself has vowed to avenge the attack.

On the northeastern end of the world map, Ukraine has intensified its offensive against Russia. Ukrainian Special Forces have pounded downtown Moscow with 171 drones, attacked Russian warships in ports, and even detonated a Russian oil rig in the North Sea. In retaliation, Russia launched a barrage of long-distance missiles into Ukraine, resulting in significant casualties.

Meanwhile, the U.S., U.K., and their NATO allies are contemplating granting Ukraine authority to use Western-made long-range missiles. President Putin has made veiled threats against the West this week. Additionally, the Chinese Navy has increased its provocative stance, with a Chinese Navy vessel ramming into a Philippine patrol boat. This incident has intensified global tensions, giving a real sense of the possibility of both political and actual warfare.

As a result of these global events, the ship recycling markets are facing profound challenges as the industry heads towards Q4 2024. Financially, we have seen fluctuations in fundamentals. On one hand, news of potential reductions in U.S. interest rates led to a slight decline or stabilization of the U.S. Dollar, providing the Indian subcontinent and Turkish currencies a much-needed opportunity to stabilize. On the other hand, local steel plate prices in India and Pakistan suffered significant declines, undermining their +USD 500/LDT levels, which were previously the only factor keeping Ship Owners and Cash Buyers interested in these recycling destinations.

Even in the West, Turkish steel prices fell through late August, at a time when local levels were the only safety net for recyclers. These declining steel levels have shown few signs of easing in India and Pakistan, where Gadani recyclers are reluctant to be competitive. Bangladesh continues to experience instability as well.

The bright side? There is none. The availability of candidates remains abysmal due to global affairs, choking out the possibility of determining new recycling lows, which are changing every week. As a result, ship recycling markets need to find some stability before offering fresh bids on any units, leading to a complete standstill. Any candidates that do come for sale are met with comical numbers, as recyclers choose to wait and see where prices finally settle before returning to a historically firmer market that is, paradoxically, doing the opposite in 2024.

For Week 37 of 2024, GMS Market Rankings / vessel indications are as below: 

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