|Ship recycling activity, Gujarat, India|
The CEO of Singapore-based cash buyer Wirana Shipping Corporation told IHS Maritime that he believes scrap prices of ships cannot fall any further and that the market should stabilise in August.
Rakesh Khetan said, "It is a blood bath right now and prices are unlikely to drop further.
"Many yards are empty. Early in the year, we saw many bulkers being sold for scrap after the Baltic Dry Index fell to a historic low. But that has slowed down after scrap prices fell."
Bulker prices have been languishing at USD300-310/ldt while tankers are valued at USD330-340/ldt.
Hardly any tankers are being sold for scrap as the freight market is good. Container ship sales have also slowed considerably after hitting a high about a year ago.
"The imports of cheap Chinese steel have hurt the market, but steel makers in the Indian subcontinent have been lobbying their respective governments to do something to alleviate the situation," said Khetan.
There has also been talk that some recycling yards are facing bankruptcy, though this has yet to happen.
Khetan said, "We have not seen any official bankruptcies among recycling yards but yards are under financial pressure. They're in dialogue with their bankers and banks are cognizant of the fall in the market."
His view was echoed by Indian cash buyer Star Matrix.
In a report issued on 27 July, Star Matrix noted that prices of local scrap steel have gone up slightly by INR200/tonne (USD3/tonne) to settle at INR17,800/tonne.
Star Matrix added, "Having said that, inventory in the yards is at an all-time high, steady constant consumption for three to four months can only bring back the equilibrium between demand and supply. July has seen only about 12 vessels beached, with only one waiting. No substantial increase in demand will be seen, but it seems the price may not correct any more. This is a good time for owners to scrap their tonnage in expectation of smooth and efficient deliveries."
Source: ihs maritime 360. 30 July 2015