What's Happening?
The ship recycling industry is experiencing a low supply of vessels, as reported by GMS, a cash buyer. The Baltic Exchange has seen a decline, with the Dry Index falling by about 3% due to pressure across all segments. Capesize vessels slipped by 4.4%, panamax by 1.4%, and smaller segments by five basis points. Oil prices remained stable, closing at USD 59.70 per barrel, with expectations to breach USD 60 soon. Inflation showed minor improvements in key ship recycling destinations. However, financial currencies in India and Bangladesh have been adversely affected, with Turkey also experiencing significant currency declines. Local steel plate prices fell by just under USD 5 per ton across sub-continent recycling destinations, leading ship recyclers
to hold off on negotiations. The lack of large LNG vessels, with only 15 sold this year, has contributed to the low supply, as freight rates remain high. This situation has resulted in a notable lack of arrivals at sub-continent ship recycling locations.
Why It's Important?
The low supply of vessels for recycling has significant implications for the ship recycling industry, which relies on a steady flow of ships to maintain operations. The decline in the Baltic Exchange and currency challenges in key recycling countries like India and Bangladesh could lead to financial strain for recyclers. The stability of oil prices and minor inflation improvements offer some relief, but the overall economic environment remains challenging. The lack of large LNG vessels further exacerbates the supply issue, potentially leading to increased competition among recyclers for available ships. This situation could impact global recycling capacity and pricing, affecting stakeholders across the maritime industry.
What's Next?
Looking ahead, the ship recycling industry may need to adapt to the current low supply environment by exploring alternative sources of vessels or adjusting pricing strategies. Stakeholders will likely monitor economic indicators, such as currency fluctuations and oil prices, to anticipate future market conditions. The industry may also advocate for policy changes or incentives to encourage more vessel recycling. As 2026 approaches, there is hope for increased tonnage and stability, which could alleviate some of the current challenges faced by recyclers.
