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Ships’ Demolition Market: Cash Buyers Recent Purchases Deemed Speculative

Ships’ Demolition Market: Cash Buyers Recent Purchases Deemed Speculative
Tanker tonnage being sold for scrap has been the dominant force behind the ships’ demolition market for the past few months. However, things are starting to slow down again,

As recent purchases of tanker tonnage were speculative and prices have retreated again. Nevertheless, deals were still being concluded left and right, with more ship types entering the foray. In its latest weekly report, GMS, the world’s leading cash buyers of ships said that it was “another busy week of sales and speculative offerings seemed to convey a sector with a booming demand and buoyant pricing, as the recent rally in local steel plate prices showed few signs of abating. The markets also witnessed another VLCC fixture for the week, as sales in the tanker sector continue at pace and keen owners exploit some of the excellent prices well above USD 400/LDT”.

GMS added that “notwithstanding, we did see vessels from the dry, offshore, and wet sectors all concluded this week. It certainly seems as though there has been a steady flow of tonnage at the moment (rather than a deluge) with keen buyers emerging by the week to negotiate all available units at firmer numbers. However, it does seem as though a price ceiling to many of the offerings has been reached, given that Bangladesh is increasingly displaying signs of hesitation to match some of the firmer asking prices in recent weeks and some of the above market purchases have been failing to find even breakeven levels in Pakistan at present. India is the only sub-continent market that remains some ways behind their Bangladeshi and Pakistani counterparts, even for favored container units and it has primarily been only green tonnage (at a significant discount) that they have been able to acquire of late. Local steel prices, currencies and demand from the top performing markets do appear to be relatively steady this week, despite steel prices in China and Turkey taking a tumble of late (hardly relevant to China where they have been taking very few vessels due to the gulf in prices). As such, it was another encouraging week for Owners, Cash Buyers and recyclers alike, with plenty of fourth quarter activity anticipated to keep all sides busy”, GMS concluded.

In a separate demolition report, shipbroker Clarkson Platou Hellas said that “with the summer being dominated by Tanker tonnage and with, seemingly, only one destination for such units, it seems that the Bangladesh buyers are becoming increasingly less keen to offer rates at the recent highs recorded. This further emphasises what many believed to be speculative purchases from Cash Buyers in the past couple of weeks who appear to now see a southern direction in price levels whilst they attempt to resell recently acquired tonnage. With the majority of tonnage that have been purchased ‘as-is’ earlier in the summer reaching the Bangladeshi waterfront, there are reports that the cash buyers are facing difficulties reselling their units at anything resembling profits. We are also still seeing that neighbouring India is still some way from taking the lead in the Indian Sub-continent. After taking a back seat for most of the year, it appears that sentiment locally in India could start to fade further after a correction in the Iron Ore pricing and in addition, reports this week in the local media outlets India is considering loosening their fiscal deficit target which in turn may cause some depreciation of their currency, hence some buyers/breakers may become cautions in their acquisitions approach (i.e. the recyclers repay their loans as per their Letters of Credit in U.S. Dollars but get weaker rupees from the steel mills). Elsewhere, Pakistan still remain aggressive for any available dry tonnage and with no real serious tonnage entering the market prices look set to remain stable and provide Owners with an avenue for higher prices in this sector”, Clarkson Platou Hellas concluded.

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