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Is the ship recycling market about to see more activity?

The ship recycling market has been hampered by reduced activity for quite some time. However, shipping experts feel that the coming weeks could offer some respite. In its latest weekly report, shipbroker said that “ss the days grow shorter now that the first of September has arrived, the engaging thoughts are whether this is the month which will see more supply of recycling candidates come into the market. We continue to see some of the vintage, Far Eastern controlled, dry bulk units coming for sale or arriving to the recycling shores having previously been sold off market. According to Clarkson Platou Hellas, “following on from our report last week, Pakistan has jumped back into the arena and this week, a bulk carrier was sold delivery Pakistan for region USD 545/ldt, a significant increase on the last similar sale which was at USD 525.00 per ldt. However, some critics suggest this was a one-off price for a particular recycler who has a Letter of Credit readily available. Looking at the arrivals list to the Chattogram, Bangladesh, there seems to be several units arriving or waiting to deliver. There are still significant issues surrounding the domestic payment availability and therefore it will be interesting to see if these finally get beached on the local yards or, cash buyers lose patience and divert across to their counterparts.

Dry bulk shipping demand to fall in 2024

In our base case scenario, we expect global dry bulk cargo volume to grow between 1.5 percent and 2.5 percent in 2023 and between 1 percent and 2 percent in 2024.

Average haul is expected to increase between 0.5 percent and 1.5 percent in 2023, driven by sanctions on Russian coal and higher iron ore and grain shipments from Brazil.

In July, the IMF forecast the global economy to grow by 3 percent in both 2023 and 2024. This is a slight improvement over their previous forecast, but still well below the 3.7 percent average annual growth seen in the 2010s. Inflation remains a key challenge in several economies, forcing central banks to increase interest rates, slowing down economic growth.

The IMF forecast GDP in China to grow by 5.2 percent in 2023 and 4.5 percent in 2024, above the Chinese government’s target of 5 percent for 2023. Since June economic conditions in China, however, began to deteriorate, giving rise to concerns. Several banks have cut their forecasts to below the government target, Barclays going as low as 4.5 percent.

China leading iron ore imports in 2023

China’s iron ore imports have increased so far in 2023, helping sustain dry bulk market rates. In its latest weekly report, shipbroker said that “2023 has been so far a positive year for global iron ore trade. In Jan-Jul 2023, global loadings of iron ore increased by +3.9 percent y-o-y to 892.6 mln tonnes, from 859.1 in the same period of 2022, based on Refinitiv vessel tracking data. It is also just above the 883.5 mln tonnes loaded in Jan-Jul 2021, which was the last all-time record. Exports from Australia increased by +2.4 percent y-o-y in Jan-Jul 2023 to 522.5 mln tonnes, easily a new all-time record high.

The Hong Kong convention, EU regulation and outstanding legal issues in various states

With the accessions of Bangladesh and Liberia as contract parties, the Hong Kong Convention (“HKC”) will enter into force in 2025. The HKC applies to ships flying the flag of a contract party and ship recycling facilities (“SRFs”) under the jurisdiction of a contract party. Bangladesh, Belgium, Denmark, France, Germany, India, Japan, Liberia, Luxembourg, Malta, the Netherlands, Norway, Panama, Portugal and Turkey are among the contract parties to the HKC.

The EU had already taken on a pioneering role with the EU Ship Recycling Regulation (“SR Regulation”) in 2013. Among other things, it requires that ships with EU flags may only be recycled by SRFs on the so-called “European list”. For ships with non-EU flags, on the other hand, the EU Waste Shipment Regulation (“WS Regulation”) applies as a catch-all provision: waste materials (including ships) from the EU may not be shipped to a non-OECD country, and to an OECD country only with a notification procedure.

Ship recycling down 14pc so far this year

The ship recycling activity has fallen by almost 14 percent so far this year, according to data from Xclusiv Shipbrokers. This, despite the fact that prices haven’t fallen that much in Southeast Asia. In its latest weekly report, the shipbroker said that “despite the fact that the demolition market is at almost similar levels as one year ago, with prices in India, Pakistan and Bangladesh being 7 percent, 10 percent and 2 percent down, while in Turkey being roughly 30 percent up, we have witnessed a significant drop in the total demolition volume compared to previous years. As of 18th August 2023, the number of Tanker, Bulk carrier, Container and Gas vessels that have gone for scrap is 129 ships, almost 14 percent down compared to the same period of 2022 and the lowest number of at least the past 5-year period.

Hybrid progress increases shipowner options

The maritime sector is experiencing a remarkable shift with the emergence of hybrid ships as one solution to achieving net zero in shipping. In a paper, marine technology specialist Wärtsilä examines the latest trends shaping the course of hybrid ship propulsion. From the introduction of novel battery chemistries and the surge in battery power capacity to the promising potential of fuel cells and the evolution of electrical integration concepts, hybrid technology is transforming, driven by sustainability and optimised performance.

Traditionally, marine batteries have relied on lithium-ion technology, much like those used in the automotive and energy sectors. However, Wärtsilä identifies a significant shift in this area.