Highlights of the Week

Ship Recycling sector is experiencing a shortage of tonnage as many owners are reconsidering their decision and withdrawing their assets from demolition market due to recent spike in tanker chartering rates. On the other hand, metal prices are surging due to multiple sanctions against Russia that are disrupting the supply chain for several commodities. It may take a few months to restore the entire supply chain, so prices are likely to remain elevated. The offers from end buyers of all major recycling destinations are going northwards to secure tonnage to meet their domestic market demands.

Global inflation rates have surged to multi-year highs, sparking anxiety that prices of everything from wheat to natural gas will shoot up due to Russia’s growing isolation. Traders, banks, and shipowners are increasingly avoiding business with Russia because of the difficulty in securing payments, while shipping lines are cancelling or not taking bookings from the region. The economic impact of escalating tensions between Russia and Ukraine are now being felt across the world.

Iron ore prices climbed this week over concerns that a prolonged conflict between Russia and Ukraine could curb global supply.

The Federal Reserve is poised to raise its key interest rate by a quarter point to combat the surge in inflation despite the ongoing global volatility and the slide in stock markets following the fire at the nuclear power plant in Ukraine.

Market maintains strong momentum

Steel prices are spiraling upwards day by day increasing by about USD 65-70/MT this week as ongoing geopolitical tensions are fueling concerns of supply shortages. The end buyers are bidding aggressively to secure tonnage as there are very few vessels available in the recycling market and the appetite of domestic and export market is going strong.

Government of Gujarat presented the financial budget for 2022-23 on Thursday which includes setting up of Gujarat Port and Logistics Company and addition of 45 new ship recycling plots near Alang to increase the capacity of Ship Recycling in that region.

Leading the Subcontinent Market

Bangladesh is experiencing an increase in demand for Ship plates due to the resumption of construction activities and favorable steel prices. With improving tanker freight rates, recyclers are bidding competitively to secure tonnage before it is too late.

As a result of rising demand and imported scrap prices, domestic rebar offers have increased by USD 25/MT week on week. The ongoing supply concerns and the upcoming holy month of Ramzan are being seen as reasons for this spike in demand.

Rise in price of Ship Plates

The domestic steel demand remained stable with an improvement of USD 10/MT in the price of Ship plates. Although recyclers are apprehensive about the current price levels due to the slow demand from end-user industries, they are eager to buy as the domestic prices are bound to rise in tandem with the rising import scrap prices.

Imported scrap prices have increased by about USD 35-40/MT amidst the ongoing trade tensions between Russia and Ukraine. However, the trade volumes have fallen due to subdued finished steel demand. As a result of the rising prices, mills are only purchasing in order to fulfill their immediate needs and are not looking to build inventory at these levels.

Inflation jumps to 20-year high

Imported scrap has increased by about USD 60-70/MT this week due to Black Sea turmoil, while domestic scrap has increased by approximately USD 20/MT.

Turkish consumer prices rose an annual 54.4% driven by weak lira and a surge in energy and food prices. This acceleration takes benchmark interest rate adjusted for inflation to around negative 40%.

Lira weakened further against dollar this week and currently trading at TL 14.26/USD as investors seek safe havens amid Russia’s invasion of Ukraine failing the attempts of government which maintained Lira’s stability through costly interventions in forex market.