The surprise came last week from Bangladesh where the High Court of Justice ruled on March 18th, 2009 that all ship recycling yards not operating with environmental clearance should be closed within two weeks, Eckhardt Marine reported. As none of those yards operate under such requirement, this would have practically meant for all Chittagong-based yards to stop their activities. The court decision detailed several measures vessels (cleaning-up, safeguards measures…) should be complying with before entering Bangladesh for ultimate disposal. The consequences were immediate: the local banks stopped processing of Letters of credit, the Director General of Shipping refrained issuing the so-called “no-objection certificate” making any further imports of recycling ships not possible. The entire Bangladeshi ship recycling industry was frozen just as the prices were getting above the USD 350/- per Lightweight level.
We now understand that the matter is in the process of being solved with a petition successfully filed against the decision of the High Court of Justice. However recent sales to Bangladeshi breakers at improved levels may come under pressure and may be re-negotiated by parties taking advantage of this situation.
The Indian market continues to be depressed with the exchange rate of the Indian Rupee depreciating against the U.S. Dollar and the local steel market falling down. We estimate the price correction the Indian market sustained to be between USD 25/- and USD 30/- per long ton Lightweight. The about 150.000 tons of Lightweight to be delivered to Alang-based shipbreakers should not be supportive of any price recovery
at very short term.
Despite ongoing political problems, the Pakistani shipbreakers have been able to take advantage from the situation on both Indian and Bangladeshi markets in securing two further units for recycling. Since the beginning of 2009, more than 250.000 tons of Lightweight have been beached in Gadani Beach corresponding to a market share of 13% of the vessels delivered to recycling yards.
The Chinese market has further dropped this week with prices below USD 200/- per Lightweight for tankers and large bulkers. Prices related to green dismantling are about undergoing the USD 150/- per long ton Lightweight depending of the type and size of the concerned units. Despite the massive flow of vessels delivered to Chinese breakers for green dismantling, the market share of Chinese market remains below 10%.