GMS: Pakistani Scrapyards Starving for Tonnage

The ongoing shortage of bulkers intended for scrapping resulting from the market recovery is expected to starve an overheated Pakistani market for tonnage, especially on the back of the country’s tanker ban still in place, according to GMS, one of the world’s largest buyers of ships for recycling.

The Gadani recyclers have missed out on the large LDT tanker and VLCC units sold over the recent past.

Hence, the year started with some risky tactics from speculative buyers aiming to drive pick up in rates with crazy fixtures.

“After a brief period of uncertainty and diminishing sales, an extraordinary and frankly unbelievable Capesize bulker fixture captured the attention of the industry this week and shifted the focus of industry players back on Pakistan once again,” GMS said.

As informed, one cash buyer paid uncharacteristically above the market about USD 45/LDT, with the expectation that closer to physical delivery, local prices may rise enough to make this a sensible deal.

However, GMS believes that this will result in a loss-making deal for the said cash buyer.

“This is undoubtedly an extremely risky tactic to employ as the fixing price is about USD 50/LDT away from where Gadani levels currently stand for dry units. When markets are positive, speculative offerings in excess of USD 10 – 20/LDT are commonplace. However, this price is definitely not reflective of current rates and could eventually come back to haunt the relevant shipowner/cash buyer,” GMS said.

Despite the fact that the majority of LDT tankers are being taken by Bangladeshi yards, the country’s scrapyards have lost a few VLCCs to a rampant India and Chittagong.

As highlighted by the cash buyer, buyers really need to step up their game if they are to secure more of their favored vessels in the coming weeks, since there seems to be little to no chance of securing dry tonnage and Capes/Panamax containers, seeing how Pakistan remains in exceptional form.

“As such, it was unsurprising to see a blank sales board for another week. Luckily for local recyclers, there are a number of vessels from previous sales from the months gone by that are still taking up space on local yards as cutting has been comparatively slower this year,” GMS added.