Shipowners are still holding on to older vessels that would probably already have been sold for recycling in yards across India, Pakistan and Bangladesh under more traditional market conditions. Exceptionally strong charter rates are allowing even aging ships to generate healthy returns, encouraging owners to delay demolition.
The trend is putting pressure on ship recyclers across the Indian subcontinent. Strong charter markets, which have been unusually strong in recent months, have reduced the number of vessels available for recycling at regional yards, while also pushing scrap prices higher, analysts say.
Indicative recycling prices in Bangladesh and Pakistan have bounced back to the $500s after languishing in the $400s for an extended spell.
According to GMS, the world’s biggest buyer of end-of-life ships, Bangladesh and Pakistan yards are currently offering indicative prices of $540-$530 per ton for container ships, $530-$520 for tankers and $510-$500 for bulk carriers.
India’s recycling market lags a little behind its neighboring competitors on price. Container vessels are generally offered at around $495 in Alang, tankers at $485 and bulkers at $465. But those levels are higher than prices seen recently.
There are also concerns about future capacity of the industry, with the number of vessels coming to the end of their life and heading to demolition yards decreasing, while the need for recycling infrastructure remains.
Meanwhile, GMS pointed out the continued preeminence of India in handling more complex vessels. Alang yards remain strong in the recycling of LNG carriers, reefers, passenger ships, vessels with significant non-ferrous materials and compliance sensitive units.
These more specialized vessels, GMS said, are assessed under different valuation processes so their recycling prices may not necessarily track with the same benchmarks used for conventional container ships, tankers and bulk carriers.
