The subcontinent ship recycling destinations are struggling with high fluctuation in currency exchange rates, restrictions in the issuance of Letter of Credit, heavy rains, and dull demand from finished steel users, leading to a significant fall in their offer prices and buying capacity. On the other hand, all categories of vessels are enjoying staggering freight rates, resulting in a dearth of vessels being retired for recycling. This situation has largely remained unchanged for the past few weeks, leaving a substantial number of recycling yards empty, with little hope for revival anytime soon. It remains to be seen at what point this hunger for tonnage will push the prices to a level which can attract the owners to consider retiring their aging units.
Ukraine announces that the first ships carrying grain will finally be leaving two ports this weekend under a United Nations-brokered deal to end Russia’s blockade. Under the agreement signed by Russia and Ukraine, the sea corridor, convoy and inspection of the cargo are all being organised by a joint co-ordination centre (JCC) in Turkey. This move is expected to ease the vicious cycle of food inflation that is causing havoc in many poor countries.
A surge in international oil and gas prices has intensified the economic crisis seen in some emerging markets, especially nations that are highly dependent on energy imports with very low foreign exchange reserves. The energy issues will create a ripple effect with prolonged power cuts and possibly hamper industrial growth in the region.
The U.S. Federal Reserve hiked its benchmark interest rate by a further three-quarters of a percentage point in its meeting this week with a clear indication of another rate hike when it meets in September. The IMF now expects the world economy to grow 3.2% in 2022 before slowing to a 2.9%GDP rate in 2023 — marking a downgrade of 0.4 and 0.7 percentage points, respectively, from April.
The domestic steel demand and prices have remained stable in India supported by improving economic activity. Inventory levels at many yards have declined, which has contributed to a shortage of ship plates in the market, increasing the price gap between ship plates and scrap.
With growing competition from China in the Middle East and Vietnam, alongwith a temporary withdrawal of European buyers due to summer holidays, Indian HRC export offers will likely remain under pressure.
The International Monetary Fund in its latest world economic outlook report released on Tuesday this week has projected India to be the fastest growing major economy in FY23 which reassures that India isn’t in the same boat as its South Asian neighbors, even though it’s in the same choppy waters.
As per the World Steel Association data, India is the only country which has registered a positive growth in its steel output during June.
The end buyers of Bangladesh have shown buying appetite due to alarming levels of inventory at the yards, but they have moved to sidelines due to ongoing instability in currency conversion of BDT to USD and the increasing restrictions in opening of Letter of Credit.
Bangladesh is seeking a USD 4.5 Billion loan from the International Monetary Fund to reduce macro economic risks and create financial buffers as surging energy import costs drain its foreign reserves.
The Central Bank of Bangladesh has further reduced the value of Letters off Credit that requires approval of central bank to USD 3 Million from theearlier value of USD 5 million.
Government has ordered an operational halt at diesel-fed power plants. The country, which has close to a month of diesel reserves, began scheduled power cuts to preserve its diesel and natural gas stockpiles to reduce the impact of costly fuel imports.
Heavy rains have rendered the roads leading to Gadani impassable for the time being, halting yard activities and materials transportation from yards.
There has been slowdown in buying orders from Steel mills throughout the month due to LC opening issues, political instability and slow construction activities due to heavy rainfall, leading to a continued softening of prices.
The rising cost of energy is taking a toll on the power sector, where already close to a quarter of the nation’s power-generation capacity has been shut due to shortages of natural gas, fuel oil and coal. The energy payments and dwindling foreign ex change reserves propelled the rupee to its worst weekly decline since 1998 last week.
At least 357 people have died and over 400 others injured as heavy monsoon rain have continued to batter Pakistan for more than five weeks.
One Cruise ship of about 10,000 LWT has arrived in Aliaga this week.
Steel mills are postponing their buying orders in anticipation of further discounts in prices due to weak finished steel demand in the domestic and overseas markets.
Due to lack of support from the finished steel segment and lower imported scrap prices, billets prices have been falling in the domestic market.
The Turkish Central Bank released Inflation Report for 2022 this week, wherein it predicted annual inflation for year-end 2022 to reach 60.40%, up from 42.80% previously.