Davis Index: Market Intelligence for the Global Metals and Recycled Materials Markets

Reduced workforce and travel restrictions due to COVID-19 has affected the productivity of shipbreakers in India, who are also reeling under increased competition from Pakistan and Bangladesh, shared Dr. Anand M Hiremath, Head Research & Development, Lead Coordinator Responsible for Ship Recycling at Global Marketing Systems (GMS) in an interview with Davis Index.


1. Why are prices for shipbreaking scrap generally down despite stable global ferrous scrap prices? 

During recent weeks, we noticed an overall improvement in prices with growing demand, especially in Pakistan and to a certain extent in Bangladesh. In India, the workforce is still not back given the limitations related to COVID-19 and travel restrictions. Hence, productivity and subsequent demand from the yards is still affected. Depreciating currencies across the subcontinent are impacting prices. 


2. How much excess tonnage is available to be recycled compared to the current demand?

We do not see excess tonnage of what can be accommodated from the available recycling capacity in the subcontinent. There is certainly an increase in the supply of Containers (and PCTCs) for recycling. 


3. Will there be a glut in coming days impacting prices? Also what bearing will it have on imports?

Traditionally, markets improve post-monsoon, so we remain cautiously optimistic, subject to other fundamentals affecting the pricing like supply, demand, currency and commodity values. Charter rates are picking-up slowly and we expect global economies to get back to work.


 4. Pakistan is bidding more aggressively over India and Bangladesh. What are the market dynamics supporting these bids?  

The Pakistani market has not been very active during the past couple of years. With the increasing demand for steel but also with the recent devaluation of the Pakistani Rupee, it appears that few buyers have taken an investment approach in order to hedge their national currency against the USD.


5.  Since India follows HKC guidelines, how does it reflect on bids? 

With  78 out of 120 ship recycling yards in India complying with the HKC standards, the discount offered to them is small compared to other yards. The real difference comes at a time when the Indian market overall is not so aggressive, compared to neighbouring countries like Pakistan and Bangladesh. In such instances, we have witnessed discount go higher than 10pc, and if required to give a Statement of Compliance (SOC) from HKC related to a specific Classification Society only then such discount can increase steeply.

6.  This year along with monsoon, COVID-19 has also adversely affected businesses. How will it impact the shipbreakers in India, and when is the market likely to recover?

COVID-19 has brought a big uncertainty globally, not just in the ship recycling industry. In India the yards are operating with 25pc workforce and have to comply with Standard Operating Procedures issued from relevant authorities. The monsoon season usually impacts the supply of offshore under tow assets. Though supply increased during the past few months, we are noticing less productivity due to labour scarcity and weak demand by end users. This is affecting the demand from yards for new tonnage considerably.

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