GMS: Ship recycling off to slow 2024 start, a market running out of oxygen

GMS Inc., a global purchaser of  sea freight vessels offered to the ship recycling market, says the first seven weeks of 2024 have demonstrated a lack of vessels heading for dismantling and recycling.

“Despite Chinese New Year Holidays concluding [Feb. 16], a pervading theme of an unrelenting dearth in the overall availability of tonnage across global ship recycling markets has been enduring for several quarters now, resulting in another dry and dreary week of market inactivity and silence across all recycling destinations,” GMS writes in mid-February.

While many container shipping lines have been phasing in new vessels, the company writes, “Even in the container sector, wherefrom an overall clearing of older units has been overdue, this segment continues to (surprisingly) generate a bevy of second-hand buyers of overaged box carriers who are willing to fix and operate these aged units.”

The desire to keep ships on the water seems tied in part to the disruptions caused by attacks on shipping in the Red Sea region, which has spurred higher sea freight rates and a scramble to reposition containers where they are needed.

GMS says freight rates in the dry bulk sector also are rising, “placing a tighter squeeze on the overall supply of vessels for recycling, a subsequent firming of demand and offers from the Bangladeshi and Pakistani markets, and a simultaneous cooling of sentiments and pricing from an inexplicably reserved India.”

The company describes ship buying sentiment in Bangladesh and Pakistan as possibly improving but dependent on whether ship dismantlers can secure a letter of credit.

GMS describes buying sentiment in India and Turkey as “weak,” with the ship broker saying Turkey has “reported further negative movements in import steel as well as the Turkish lira, making matters further worse for a market that is rapidly running out of oxygen.”