The Ship recycling industry continued its strong performance throughout the week as the subcontinent buyers, particularly those from Pakistan and India are offering attractive prices to secure tonnage and the owners of aging assets are eager to capitalize on the ongoing price levels. With soaring inflation around the globe, it remains a concern that at some point the heated prices of commodities may lead to demand destruction, and result in reduced offers from end buyers.
The Asian Shipowners’ Association (ASA) stressed on the importance of increasing capacity and improving environmental credentials of the ship recycling yards in the 25th Interim meetings of their Ship Recycling Committee in anticipation of the increasing number of vessels set to be retired due to decarbonization regulations in the coming year. They emphasized that the Hong Kong Convention for the Safe and Environmentally Sound Recycling of Ships should come into force to resolve these issues.
Oil prices look volatile and sloppy over the near term as the market is struggling to digest a multitude of global factors affecting its demand and supply. This week the prices rallied after the news of European Union considering a phased import ban on Russian oil came out. While the decision of oil sanctions and overall energy decoupling from Russia is clear and broadly uncontested, many E.U. countries which are highly dependent on Russia have long resisted this move due to its potential to disrupt industries around the region and drastically increase energy prices.
The recyclers of India are eager to buy more tonnage as the domestic demand remains strong and the inventory levels of the yards are decreasing. The offer prices have increased by about USD 10/LDT this week and are strongly competing with their neighboring counterparts from Pakistan to secure more vessels.
The near-term outlook of Indian steel industry remains buoyed as construction activities gather momentum and increased sanctions against Russia are opening newer export opportunities.
Mills have increased their scrap offers propelled by increasing sponge iron and semi-finished steel prices.
The offers from end buyers of Bangladesh have remained flat with no major movement since the past two weeks. There have been very limited inquiries from buyers as the mills have decreased their orders due to slow moving domestic market.
Major steel mills have decreased their rebar offers by USD 20/MT to encourage buyers amid slow construction activities.
Imported scrap trading remains dull as there is less demand due to upcoming holiday period and mills are booking only to meet urgent needs.
The offer prices from recyclers of Pakistan are going strong despite a lack of lifting from the local markets. Due to the newly imposed 100% cash margin by the Central Bank on importation of 177 items including major Steel products such as HRC and CRC, the focus has shifted towards the Ship recycling industry as this is currently the only way to import steel into the country without cash restrictions.
Pakistan’s newly elected Prime Minister Shehbaz Sharif, a steel dynasty scion, promised to bring unity and revive the ailing economy. The most urgent challenge for the new leader is to secure a credit line with IMF as the nation is struggling with inflation in the double digits, skyrocketing prices for basic necessities such as food and fuel, and fast depleting foreign exchange reserves.
PKR made a sharp recovery against USD this week as the massive hike in interest rate to 12.25% has resulted in a sudden decline in demand for dollar. It is now trading at PKR 182.85/USD.
Two small RoPax of about 2,000 LWT have arrived in Aliaga this week.
Imported scrap prices have seen a decline of about USD 10/MT this week whereas the domestic prices have softened by about USD 25/MT. Mills have reduced the prices in response to weak finished steel demand in the local market.
Turkey’s Central Bank kept interest rates unchanged at 14% for a fourth straight month despite a surge in inflation past 60%. Many economists believe that this decision has been driven more by political considerations rather than economic indicators as the current economic situations needs higher rates. The currency is trading at TL 14.63/USD.