As the calendar inches towards the close of 2024, the global economic landscape is starting to show signs of settling, which is encouraging news for industries that have been navigating stormy seas throughout the year. This includes the shipping and ship recycling industries, both of which have been under considerable pressure in recent months. The end of week 49 saw a notably calmer period, with shipping markets, in particular, seeing less volatility. In fact, the ship recycling market, which had endured a significant downturn in prices and activity earlier in the year, is now showing signs of stabilization.
One of the major factors contributing to this more stable environment is the performance of global crude oil markets. West Texas Intermediate crude oil futures dropped by about 1.6% throughout the week, settling at $67.2 per barrel by Friday. This dip was largely driven by concerns over a potential surplus in 2025, which has kept oil production relatively tight in the short term. Meanwhile, the Baltic Exchange Sea Freight Index ended a seven-day losing streak by climbing 0.5% on Friday, primarily due to stronger performance from larger vessels. This uptick in sea freight rates is expected to influence the ship recycling market, especially in terms of the availability of mid-sized and smaller vessels being offered for recycling, which has been increasingly evident in recent reports from Bangladeshi and Indian ports.
The stabilization in the supply of recycling tonnage has been a welcome relief, especially given the volatility that has characterized the sector throughout 2024. Both Bangladesh and India, which are key players in the global ship recycling market, are seeing a more consistent flow of ships being offered for recycling. This, in turn, has helped firm up prices in some locations, with market fundamentals appearing to stabilize compared to the previous weeks. The continued strength of the US Dollar has also played a role in this recovery. The dollar has been rising against several other currencies, including the Chinese Yuan (CNY), Bangladeshi Taka (BDT), Turkish Lira (TRY), Indian Rupee (INR), and Pakistani Rupee (PKR). This trend indicates a more favorable exchange rate for those involved in ship recycling in these regions.
Despite these positive indicators, ship recycling prices remain far from the highs seen earlier in 2024. The sharp declines of up to USD 150 per metric ton (LDT) in the span of a few months have set a new floor for prices, with mid-to-high USD 400s per metric ton (LDT) now becoming the norm across most sectors. This marks the end of the days when prices of USD 500 per metric ton (LDT) or more were common. However, the fact that the market has found a floor and is beginning to recover is a hopeful sign. After a year marked by significant volatility and price erosion, there is cautious optimism that prices will start to rise again, especially as global economic conditions improve.
One of the major uncertainties hanging over the ship recycling markets is the situation in Bangladesh. The country has faced one of its most destabilizing years in history, with the sudden abdication of its Prime Minister, the imposition of an interim government, and a severe monsoon season that disrupted both infrastructure projects and ship recycling activities. As a result, the demand for recycled steel from ship dismantling has been unable to meet expectations, leading to the gradual shutdown of some steel mills. This has created a bottleneck in the market, as recycled steel could not be shifted to domestic steel production in the usual way, further impacting the profitability of ship recycling operations.
On the global political front, the outcome of the recent US presidential election may bring about significant economic changes, particularly in the form of tariffs on steel and auto exports from Mexico, Canada, and China. While this could lead to a period of economic turmoil, the impact on the ship recycling sector remains to be seen. One area of particular concern is the dumping of cheap Chinese steel, which has caused ongoing issues for steel producers in India and Pakistan. However, with the looming possibility of tariffs on Chinese steel exports, it is anticipated that there may be some relief for these countries in the near future. The Chinese government is also expected to announce a new stimulus package around the New Year, which could provide a much-needed boost to its domestic economy and, by extension, the global steel and shipping industries.
As 2025 approaches, there is growing anticipation that the ship recycling market will continue to stabilize. The key players in this market, particularly in India and Bangladesh, are expected to return to full strength, buoyed by a recovery in steel markets and a more predictable flow of recycled ships. With global political uncertainties, such as the potential for US tariffs and Chinese economic policies, still looming, the outlook for the ship recycling industry remains cautiously optimistic. If the positive trends continue, the industry may experience a gradual but steady improvement as it moves into 2025.
For now, the market appears to be on firmer footing than it has been in months. Though challenges remain, particularly with political instability in key recycling nations, the overall mood is one of hope and cautious optimism. As the year draws to a close, the expectation is that the ship recycling industry will enter 2025 with a more stable foundation, ready to tackle the challenges and opportunities that lie ahead.
