2017 Budget to Hit Pakistan, Bangladesh Scrapping Sectors
Ship-recycling sectors in Pakistan and Bangladesh have witnessed a decrease in LDT price after the respective countries released their 2017 budget announcements.
According to GMS, a cash buyer of ships for recycling, the Pakistani budget first brought falls of about USD 10/LDT, “as rumors of an even worse fate for the Bangladeshi market surfaced and were eventually confirmed” by the announcement of their budget.
While there is ongoing confusion over the real impact of both budgets, an immediate outcome has been a temporary halt to negotiations as each market tries to understand the true effect of its own budget, in addition to evaluating the effect of the other’s. Amidst all of the confusion, those end buyers who were willing to negotiate were trying to exploit the situation by offering extremely low and completely unworkable levels, GMS said.
“It does appear as though we may not make sense of the situation until next week at the very earliest and it will indeed be challenging for the Bangladeshi market until the Bangladeshi Ship Breakers Association (BSBA) try to overturn the recent implementation of taxes and duties, as they have successfully done so in the past,” the cash buyer informed.
This contributed to another period of inactivity on the sales board as the week concluded. If the reduction in the supply of vessels continues in the remainder of this year, accompanied with low scrap levels, “we may well see prospective recycling tonnage grind to a halt over the summer months.”
GMS’ report shows that the prices cooled by about USD 50/LDT from their second quarter peak and there is a growing concern that another USD 20 – USD 30/LDT could further come off if the announcements from the recent budgets bear fruit.