Members of the Pakistan Shipbreakers’ Association (PSBA) have formed a cartel in order to control rising prices on tonnage bound for recycling on Pakistani beaches.
Scrap prices in the country have risen dramatically by about $50/ldt over the past few weeks, which certain unnamed shipbreakers and PSBA members feel could be based on “irrational and unfounded exuberance with no real foundation to it”, according to GMS, the world’s largest cash buyer of ships.
The cartel has been formed in spite of the new 15% duty levied on imported Chinese steel, which was imposed in Pakistan last week.
“We have seen similar situations occur over the years and these cartels tend to be relatively ineffective and short-lived, with end buyers usually breaking rank if they desperately need to fill their plots with a vessel (generally due to banking reasons),” GMS, the world’s largest cash buyer of ships, commented today in its weekly market report. Bangladeshi shipbreakers formed a similar cartel in August.
The Pakistani group is reportedly offering prices some $20/ldt lower than others seen over the past week, which GMS says could stymie the flow of scrapping candidates into the local market.
“Notwithstanding, and as seen on many occasions in the past, it will take just one buyer keen to secure a vessel to fill their plot (pre-budget and pre-monsoon) to break rank before prices are back at the (decent) levels seen of late,” said GMS.
Pakistan is currently offering the most attractive prices per long ton compared to its competitors on the Indian sub-continent and in China and Turkey.
During the past week, Pakistan has been offering around $260/ldt for general cargo vessels and $285/ldt for tankers, both $5 higher than India, Pakistan’s closest competitor on price currently.
Pakistan has bought 11 vessels for demolition since March 1, including four capesize bulk carriers. Indian shipbreakers have acquired 21, including one cape.