Alang beached less than 10 lakh LDT for recycling in FY24, lowest in last two decades – ETInfra.com

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<\/span><\/figcaption><\/figure>MUMBAI: Alang-Sosiya in Gujarat<\/a>’s Bhavnagar district – home to the world’s largest stretch of ship-breaking facilities<\/a> – beached 125 ships for recycling in FY24 compared to 131 ships in the previous year, translating into a light displacement tonnage (LDT<\/a>) of 9,44,069.25 compared to 11,47,480 LDT in FY23, the lowest in the last two decades, as booming freight rates<\/a> forced fleet owners to desist from sending older vessels to the graveyard.

The decline in the LDT beached during FY24 compared to the previous year was 17.73 percent.

Light displacement tonnage refers to the weight of a ship’s hull, machinery, equipment and spares and form the basis on which ships are usually sold for scrap.

“The present condition of the ship recycling<\/a> industry reveals a disparity between supply and demand dynamics,” said Dr Anand Hiremath<\/a>, Chief Sustainability Officer at Dubai-based Global Marketing Systems Inc (GMS)<\/a>, the world’s largest buyer of ships and offshore assets for recycling,

“Favourable global freight and charter rates for ship owners have led to a scarcity of end-of-life ships and a simultaneous decrease in demand for ship scrap, resulting in lower prices offered by Indian recycling yards. This dual challenge highlights the formidable obstacles facing the sector. Moreover, the decreasing reliance of rerolling mills on ship scrap, influenced by an increased dependence on scrap import from alternative sources, combined with a downturn in scrap steel prices across India, presents a bleak outlook for the domestic ship recycling community. These factors collectively contribute to another challenging year for stakeholders within the Indian ship recycling sector<\/a>,” Dr Hiremath added.

Describing the situation as “hopeless”, Nitin Kanakia at Triveni Shipbreakers LLP, said that “ships are not coming, shipping rates are booming, Red Sea problem, couple of wars going on, hence nobody is ready to send their ships for demolition”.

“The LDT beached in FY24 was below 10 lakhs; it was the lowest in the last 20 years,” Kanakia stated, noting that the grim situation has hit the “micro, small and medium enterprises (MSME) the hardest”.

The ships beached for demolition mainly comprised tugs, barges and other small ships, he said.

“Overall, the conditions in India remain bleak as steel plate volatility resumes, the Indian Rupee starts to struggle, and a discernible election anxiety has been increasingly permeating of late,” GMS said in its latest weekly report.

Bangladeshi and Pakistani markets<\/a> continue to fare comparatively better, though many units are likely to be ignored as most end buyers are now preferring to wait and watch the market, rather than fill their plots with subpar tonnage. Potential letter of credit restrictions also remains a concern as it may not be ‘business as usual’ for far too long, it noted.

“As such, it remains appreciable if ship recyclers would rather prefer their yards sit dormant through this time, than have to deal with the possibility\/headaches in paying firmer levels on the questionable quality of incoming vessels that will more than likely have issues at the time of delivery, and we are therefore witnessing a small, yet growing number of yards that could be entering a vegetative state sooner rather than later. And why not? With so little activity to keep global recyclers even interested (let alone busy), it’s certainly worth a try given that it has helped Alang recyclers,” it wrote.

”The dearth of vessels currently available for a recycling sale will certainly ensure that any mis-directed dreams of discounted deals at this juncture of the year, are likely to remain just that – dreams. In the same vein, given the onslaught of a rich diet of low(er) quality selection of laid up, small(er) LDT, Chinese built tonnage that has been consistently proposed for recycling, is simultaneously frustrating the ship recycling community into offering lower and lower numbers on such units – several reportedly seeing even below $500\/ton,” GMS added.

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Booming freight rates, Red Sea crisis and conflicts hold back fleet owners from sending older ships for demolition

P Manoj

MUMBAI: Alang-Sosiya in Gujarat’s Bhavnagar district – home to the world’s largest stretch of ship-breaking facilities – beached 125 ships for recycling in FY24 compared to 131 ships in the previous year, translating into a light displacement tonnage (LDT) of 9,44,069.25 compared to 11,47,480 LDT in FY23, the lowest in the last two decades, as booming freight rates forced fleet owners to desist from sending older vessels to the graveyard.The decline in the LDT beached during FY24 compared to the previous year was 17.73 percent.

Light displacement tonnage refers to the weight of a ship’s hull, machinery, equipment and spares and form the basis on which ships are usually sold for scrap.

“The present condition of the ship recycling industry reveals a disparity between supply and demand dynamics,” said Dr Anand Hiremath, Chief Sustainability Officer at Dubai-based Global Marketing Systems Inc (GMS), the world’s largest buyer of ships and offshore assets for recycling,“Favourable global freight and charter rates for ship owners have led to a scarcity of end-of-life ships and a simultaneous decrease in demand for ship scrap, resulting in lower prices offered by Indian recycling yards. This dual challenge highlights the formidable obstacles facing the sector. Moreover, the decreasing reliance of rerolling mills on ship scrap, influenced by an increased dependence on scrap import from alternative sources, combined with a downturn in scrap steel prices across India, presents a bleak outlook for the domestic ship recycling community. These factors collectively contribute to another challenging year for stakeholders within the Indian ship recycling sector,” Dr Hiremath added.Describing the situation as “hopeless”, Nitin Kanakia at Triveni Shipbreakers LLP, said that “ships are not coming, shipping rates are booming, Red Sea problem, couple of wars going on, hence nobody is ready to send their ships for demolition”.

“The LDT beached in FY24 was below 10 lakhs; it was the lowest in the last 20 years,” Kanakia stated, noting that the grim situation has hit the “micro, small and medium enterprises (MSME) the hardest”.

The ships beached for demolition mainly comprised tugs, barges and other small ships, he said.

“Overall, the conditions in India remain bleak as steel plate volatility resumes, the Indian Rupee starts to struggle, and a discernible election anxiety has been increasingly permeating of late,” GMS said in its latest weekly report.

Bangladeshi and Pakistani markets continue to fare comparatively better, though many units are likely to be ignored as most end buyers are now preferring to wait and watch the market, rather than fill their plots with subpar tonnage. Potential letter of credit restrictions also remains a concern as it may not be ‘business as usual’ for far too long, it noted.“As such, it remains appreciable if ship recyclers would rather prefer their yards sit dormant through this time, than have to deal with the possibility/headaches in paying firmer levels on the questionable quality of incoming vessels that will more than likely have issues at the time of delivery, and we are therefore witnessing a small, yet growing number of yards that could be entering a vegetative state sooner rather than later. And why not? With so little activity to keep global recyclers even interested (let alone busy), it’s certainly worth a try given that it has helped Alang recyclers,” it wrote.”The dearth of vessels currently available for a recycling sale will certainly ensure that any mis-directed dreams of discounted deals at this juncture of the year, are likely to remain just that – dreams. In the same vein, given the onslaught of a rich diet of low(er) quality selection of laid up, small(er) LDT, Chinese built tonnage that has been consistently proposed for recycling, is simultaneously frustrating the ship recycling community into offering lower and lower numbers on such units – several reportedly seeing even below $500/ton,” GMS added.

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