The flurry of VLCC tonnage heading towards the world’s scrapyards appeared to be slowing down over the course of the past week, as a result of Easter Holidays in Europe. In its latest weekly report, Clarkson Platou Hellas commented that “with the start of the Easter holidays commencing in Europe and the end of the financial year, the market has softened from the bullish start to the month where as many as 9 VLCC’s were committed.
This Tsunami of wet tonnage has certainly shown signs of slowing down and any vessels currently workable in the market are taking longer to be committed due to the sudden lack of buying interest, subsequently resulting in a standoff between Sellers and Buyers.Cash buyers are now facing a conundrum of where the actual market lies and what position to take, as many units remain unsold from previous commitments. Financial restraints, and also crewing arrangements, are now placing several buyers under strain resulting in limited Buyers for any newly proposed larger tanker tonnage.
The Bangladesh market remains firm, but seemingly now for smaller LDT units, although some are questioning for how long they can continue to absorb the majority of tonnage on their own. The domestic steel market remains firm in Bangladesh which is encouraging, however more units look to set to end up on these shores unless some ‘miracle’ is announced from Pakistan”, said Clarkson Platou Hellas.
In a separate note, Allied Shipbroking noted that it was “another week of a considerable flow in the recycling market, despite some shakes and trembles being noted on the pricing front. At this stage, the role tanker demo candidates (especially those coming from the bigger size segments) play in shaping the current state of the demolition market both in terms of pricing and volume is more than obvious. However, as these units become less and less available, as expected, there could be some pitfalls to face in this market. For now, the extensively discussed reopening of Pakistan for tanker vessels has not yet finalized, while at the same time Pakistan is also facing negative disruptions in its currency. Moreover, taking into account the recent shake ups in the local steel plate prices from in India, we may well say that the majority of market indicators are point against a firm market in the near term. At the same time it is important to note that their were rumors circulating of softening price levels being quoted (but not concluded) in most of the main markets”.
Meanwhile, GMS, the world’s leading cash buyer said that “the anticipated and feared price decay seems to have truly set in this week, with constant declines across all recycling locations – evidence that what goes up eventually comes down! The ongoing uncertainty surrounding the reopening of the Pakistani market is also causing increasing consternation among local markets and Cash Buyers alike, who presently have a healthy collection of unsold vessels in hand that were previously committed at sky-high speculative prices and are now at risk of failing or facing significant losses.
The depreciation of the Pakistani Rupee, declining local steel plate prices in India & Turkey and fears over the impact of the new US tariffs on steel import and other Chinese products are all conspiring to dampen previously bullish enthusiasm and depress prices even further. With demand and the number of available end Buyers who are capable of opening large Lcs (particularly of VLCC size) starting to rapidly dwindle, it was no surprise to see prices on subsequent units falling at least USD 15 – USD 20/LDT below those done last week”.GMS added that “a healthy majority of Cash Buyers now have their hands full with (primarily) wet tonnage. Moreover, with hot works cleaning on the recent large LDT tankers / VLCC sales being on Buyers account (which can take almost a month to complete on the larger LDT units), it is expected to take some time before these onward sales are finalized, allowing Cash Buyers to get back in the buying once again. Monsoon is around the corner once again (towards the end of May) so any future purchases will likely be facing the usual end Buyer aversion to purchasing and importing new tonnage over the rainy season”, it concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide