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Volatile light displacement (LDT) prices stall ship sales

Ship sales

Volatile light displacement (LDT) prices stall ship sales

A hike followed by a drop in light displacement prices pause ship transactions

An upwards pricing trend for steel surfaced in the ship demolition market early this year. Shipowners were upbeat in anticipation of tonnage sales towards recycling yards. Shipbroker, Clarkson Platou Hellas observed a sharp hike by USD 30/ldt from pre-Christmas in 2020 – renewing recycling yards’ enthusiasm in demand for steel.

A sudden twist
As January 2021 concludes, an unexpected price drop between $30 and $40 ldt occurred. Cash buyers reportedly released their own inventories and flooded the market with tonnage. Clarkson stressed, “This resulted in many buyers returning to a watch-and-wait mode, and cash buyers having to withdraw or reduce previous indications on the table; the sudden ldt price drop heightened buyers’ apprehension. As a result, little activity is seen because of this altered sentiment. Many owners may have been alarmed by this but experienced players in the industry know all too well that these sudden corrections can occur. Sellers must be reminded that the numbers on offer are historically firm and possible commercial options.”

Based on the above table, declined Baltic Capesize Index (BCI)-induced price reduction would naturally have shipowners pause any planned demolition at the risk of loss.

Hopes for recovery
The pandemic is the common denominator for all industry disruptions. The sequence of events has also been unpredictable – multiple waves followed by new strains led to more travel restrictions. Vaccinations’ availability did minimal to improve economic situations given the world is struggling to contain death tolls and new infections in record numbers.

Clarksons concluded it will take some time for businesses to stabilise; at least till majority of the world is vaccinated. The company added continual disruption is expected due to more port restrictions on crew changes. Businesses are urged to relativize the current market uncertainty to the pandemic while waiting for things to improve further this year.

GMS, a renowned buyer of ships and offshore assets said in their recent report that sub-continent markets have continued their depressing downward cycle; with virtually no fresh enquiries on currently available tonnage, plus the falling through of previously concluded high-priced deals. They have also observed declined prices in Bangladesh by at least USD 50/ldt, resulting in buyers’ pausing their sales but continue trading their respective units, especially as freight markets remain relatively firm.

With a price reduction of steel at between USD 30 and USD 40/ldt across Pakistan, Bangladesh and India, GMS remains optimistic of a rebound – attributing to stabilised tonnage supply as observed in recent weeks.

Caption: Reduced LDT prices in descending order by ldt

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Ship sales

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