GMS: Ship recycling markets show some positivity

On Saturday early AM hours Iranian time, IDF jets targeted Iranian military sites, including missile locations, fuel silos, arms depots, missile radar systems, and various other army installations via three rounds of airstrikes, resulting in Iran raising the threat level by vowing a response. Surprisingly, Iran also voiced “the need for regional stability,” which seems like the first sign of a possible retraction of ongoing incursions into Gaza, Lebanon, and even Yemen. As President Biden urged the nations to stand down and Israel starts withdrawals across Gaza, a spiderweb of hope remains amidst the raging fires. Due to the IDF’s decision to avoid targeting nuclear and oil facilities across Iran, oil futures recorded marginal gains over two days of about 3.7%, with lingering anticipation of further declines given a rise in oil production across non-OPEC nations and recent lower output from OPEC.

For the ship recycling markets, there is more positivity this week as the Baltic Index’s main Sea Freight Index fell for its ninth consecutive week, dropping to its lowest levels of the year. This decline affects older trading fleets, prompting all recycling markets to register imports at their respective waterfronts, including a welcome return from Pakistan. However, fundamentals continue to diminish interest in negotiating for tonnage, as steel plate prices dropped significantly in Bangladesh and India, likely reacting to last week’s decline in Chinese steel.

Moreover, the BRICS meeting in Russia is working toward establishing a mutually agreeable currency to reduce U.S. Dollar dominance—a hopeful vision at this point since the IMF is largely funded by the United States and could lead to economic uncertainties for countries dependent on the IMF/U.S. Dollar reserves. Consequently, recycling nation currencies dropped in Turkey and remained low elsewhere, except in China, where the Dollar appreciated 24 basis points against the CNY.

Overall, global ship recycling markets continue to struggle in finding direction, with further declines expected across all Indian sub-continent locations. Bangladesh remains unable to compete with India, resulting in a weak port report. Meanwhile, Pakistan, despite recent activity, has receded into dormancy, with sales levels below USD 500/LDT even for high-value container units. Lastly, an isolated Turkey continues to face declines, with prices expected to drop towards USD 450/LDT rather than rebound to the USD 500/LDT mark, as bleak times look set to persist through the remainder of 2024.

For Week 43 of 2024, GMS Market Rankings / vessel indications are as below:

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