Indian Recyclers Gain Ground As Bangladeshi Yard Offers Soften
Ship recycling activity is shifting towards India as conditions in the Bangladeshi market deteriorate, with Indian steel plate prices rising by about four dollars a tonne while Bangladeshi recyclers have cut their offers by roughly ten to fifteen dollars per light displacement tonne. A strengthening Bangladeshi currency, supported by substantial foreign exchange inflows, has compounded the difficulty for buyers there.
The mechanics of the recycling market run almost entirely through local steel prices. A yard buying a vessel for demolition is really buying steel plate, and the price it can offer per light displacement tonne is set by what the reclaimed steel will fetch domestically, less the cost of cutting it up. When local plate prices rise, offers rise with them and the yards in that country win tonnage. When the local currency strengthens, dollar-denominated offers become more expensive for the yard to fund, and its competitiveness falls even if steel prices are unchanged.
Both effects are currently working against Bangladesh and for India simultaneously, which is why the shift has been relatively quick. Owners selling a vessel for demolition are highly price-sensitive, because the ship has no alternative use and the difference between competing bids goes directly to the seller. A gap of ten to fifteen dollars per light displacement tonne on a large vessel amounts to a very substantial sum, and it moves the tonnage.
The competitive position between the two countries is not only financial. Bangladesh has been working, under considerable international pressure, to bring its yards into compliance with the international convention governing safe and environmentally sound ship recycling, which requires capital investment in impermeable working surfaces, waste handling and worker protection. India moved earlier on the same requirements and has a larger number of certified yards. Compliance costs money and narrows the price a yard can offer, but it also determines which owners are willing to sell to it, since European operators face regulatory and reputational constraints on where their ships may go.
The volume of tonnage available for recycling is the other half of the picture, and it has been unusually thin. Strong freight markets across several segments have kept older vessels trading rather than sending them to the beach, and the yards have competed hard for the limited supply. In that environment small movements in steel prices and exchange rates decide where ships go, and the market can swing between countries within a matter of weeks rather than seasons.
