Highlights of the Week

The Ship recycling market remains in limbo for yet another week as both the owners and the end buyers are holding back and gauging the market sentiments to judge the direction of prices. With ocean freight rates setting staggering new records day by day, the recycling market is bound to experience paucity of tonnage in the near future and the recyclers will have to remain highly competitive to secure tonnage in such a tight market.

Oil prices continue their rally and WTI is trading at USD 116.30 per barrel despite OPEC+ agreeing to a production hike of 648,000 barrels a day for July and August as the market is disappointed that the hike is spread across the member nations, many of whom may fail to meet the raised output. The ramp up in supply is not expected to be enough to meet the widening gap between demand and supply and the prices are forecasted to average around USD 120-125 per barrel in the second half of the year.

The coming week will see the shipping world converge together in Greece from June 6 to June 10 as the Posidonia returns after a gap of four years. 1,929 companies from 88 countries will exhibit their products and services and about 20,000 international visitors are expected to attend the event. 

Central banks around the globe are tightening up interest rates to combat inflation leading to rising costs and slower economic growth. Since the higher prices are stifling demand for commodities, their rally is expected to ease from next quarter but will remain higher than their pre-war levels as the Russian supplies of many commodities will be reduced.

Market sentiments remain flat

The scrap prices remained volatile throughout the week, improving by about USD 25/MT at the outset but fading by the end of the week. This volatility in prices is causing indecisiveness among the recyclers to put firm offer for securing any tonnage and they are waiting for the demand and prices to stabilize. 

Indian steel producers are staring at a sharp correction in profit margin led by an ill-timed levy of export duty as domestic demand has been subdued, prices are falling and the seasonally week monsoon period has kicked off.

Imported scrap prices have further softened by USD 10/MT week-on-week.

Demand remains subdued

The end buyers of Chattogram are looking to secure small and mid-sized tonnage but there is a significant gap between their offer prices and sellers’ expectations and thus no deals have been finalized since past few weeks.

Amid the ongoing foreign currency reserves crisis in Bangladesh, the Finance division has proposed measures to rein in important spending in the upcoming budget which will be presented in Parliament on June 9. The Central bank has instituted measures such as raising the Letter of Credit margin in order to discourage imports.

Imported scrap prices remained stable led by fresh orders placed by mills due to diminishing inventories.

Shrinking inventory drives buying interest

The recyclers of Gadani are anticipating a shortage of inventory at their yards in the near future if they are unable to secure tonnage from the recycling market and have therefore started inquiring about vessels but at a lower level than their neighboring counterparts i.e., India and Bangladesh. Additionally, stabilization and improvement of the PKR has boosted the confidence of the end buyers.

To strike a deal with the IMF on an urgent basis, the government has increased the prices of petroleum products by PKR 30/liter and will hike the electricity prices by PKR 7 from July 1sending shockwaves throughout the country, which is already battling an imminent economic crisis. It is critical to secure the USD 6 billion IMF loan programme to be able to repay USD 21 billion in foreign debt in the next fiscal year and save Pakistan from going bankrupt.

Imported Scrap prices continue their downtrend

One Cruise ship of about 16,000LWT has arrived in Aliaga this week.

The recyclers are hesitating to finalize any deal as the domestic steel prices continue their downtrend and softened by about USD 15/MT this week.

Imported scrap prices have fallen to a nine-month low, but mills have been able to book some orders at these discounted levels to meet their urgent requirements.

Turkish inflation spiked to 73.5%in May as it came under more pressure from the surging food and energy prices while ultra-loose monetary policy contributed to currency weakness. Turkish Lira is currently trading at TL 16.51/USD.