Older tonnage could headed to scrapheap ahead of the IMO 2020

A sudden surge has been seen in scrapping enquiries after months of benign activity in the sector, although some reports continue to claim that the numbers of demolition enquiries were underwhelming.

In its report last week, GMS, the world’s largest cash buyer of ships, said that “after several weeks of all pervading negativity off of the back of slumping Bangladeshi steel plate prices, the rollercoaster nature of the international ship recycling markets was on full display this week, as prices and sentiments once again started to step towards being positive.

Previously in Chittagong the Bangladesh Shipbreakers Association had tried to form a cartel and impose a price ceiling of $350/LT LDT on any available units. This shifted the focus of Ship Owners and Cash Buyers towards the Indian and Pakistani market.

GMS added that “it now appears that there could be an increase in potential tonnage for sale from Owners, as the end of the year looms and the new Sulphur regulations come into effect from January 2020. However the fear was that a potential rush of older vessels might now start to hit the market, putting downward pressure on prices.

Shipbroker Clarkson Platou Hellas said that “we end the week once again on a familiar feeling of an underwhelming period, but there was some savour from the handful of sales that did manage to go through and provide some market commentary. The various offers witnessed from Cash Buyers this week showed us how different everyone’s outlook for the market currently is, as some speculated upon a rise in Pakistan, while others are cautiously watching from the side-lines and waiting to see how this current depressed market plays out until the end of the year. Allied Shipbroking said in a note that “the ship recycling market resumed on a sluggish pace for yet another week, with very few units being sent to the breakers yards. However, some positive signs are starting to emerge, stretching hopes that an uptick in the market is now in sight. The most positive news came from Bangladesh this past week, as it seems that scrapyards are not keen on following BSBA’s attempts to shape a pricing cartel. As a result, interest from owners of vintage units has started to revive and slots have begun to fill up once again.”

Allied concluded that in Pakistan things were getting worse, with some of the local breakers starting to shut down due to lack of activity. “Added to this, there is little sign of a potential rebound in the market, making for any even more gloomy outlook for this specific market”.

Meanwhile global bunker trader KPI Bridge Oil has reported that its sales of 2020-compliant fuels had exceeded sales of HSFOs for the first time.

Soren Holl, CEO of KPI Bridge Oil, said that the market should prepare for a period of big swings in pricing for VLSFO, depending on location.

“We started fixing 0.5% sulphur contracts in flow ports at the beginning of Q2 and, as expected, the demand from business partners looking to secure availability of 2020 compliant fuels has steadily increased since. In this final stage of the switch to 2020 compliant fuels we’re experiencing significant price and availability fluctuations in most ports around the world as the market adjusts. We have previously talked about an anticipated price differential of 30% to 40% between compliant and non-compliant fuels, depending on region and local availability and this upward drive on prices seems to be materializing.”