Bangladesh has taken the lead in the prices of scrap ships among the five major recycling destinations in the world as the local market has been witnessing a rise in demand for scraps since November.
The shipbreakers said they are buying ships at a higher price to meet the huge local demand for scraps or raw materials of steel factories which puts Bangladesh at the top of the list of the scrap ship buyers.
According to the latest bulletin of GMS, the world's largest cash buyer of end-of-life ships, published on 30 November 2020, currently prevailing prices in Bangladesh are around $400 for containers, $390 for tankers, and $380 for bulk carriers for per Light Displacement Tonnage (LDT).
In June 2020, prices in Bangladesh were $310 for containers, $300 for tankers and $290 for bulk carriers for per LDT.
The current prices for per LDT in India are $360 for containers, $370 for tankers and $360 for bulk carriers while in Pakistan $390 for containers, $380 for tankers and $370 for bulk carriers. However, in Turkey, per LDT prices are $240 for containers, $230 for Tankers and $220 for bulk carriers.
Around 95% of the world's ship recycling facilities are located in Bangladesh, Pakistan, India, China and Turkey. However, China banned the import of foreign vessel for recycling in 2019.
Currently, the peak season is going on in the construction sector in the country. So, there is a strong demand for steel in the local market
Shahriar Jahan Rahat, deputy managing director of KSRM, one of the leading steel manufacturers of Bangladesh, told The Business Standard, "Almost all the shipbreaking yards turned empty due to the Covid-19 pandemic. Currently, the peak season is going on in the construction sector in the country. So, there is a strong demand for steel in the local market."
According to the latest bulletin of GMS, both India and Pakistan will have to revise their respective price ideas upwards as well if they want to compete with Bangladesh during the last month of the year and early 2021.
Mohammed Zahirul Islam, managing director of PHP Ship Breaking and Recycling Industries Ltd, told The Business Standard, "Bangladesh has imported fewer ships in 2020 compared to the previous year or compared to other competitive countries like India and Pakistan."
"The industry came to a standstill from April to July. Suddenly we have seen a huge increase in the demand for rebars and scrap in the local market. Shipbreakers are buying ships at a higher price to meet the demand," he added.
Mohammad Sarwar Alam, director of Golden Iron, a ship importer for recycling at Sitakunda, said, "The prices of scraps in the global market on Wednesday was $430-$450 per tonne while the price of scrap ships was around $400."
"Construction works were halted around the country due to the pandemic. But now many construction works are going on. So, there is a good demand for steel in the local market. But there is a shortage of supply in both from the ship breaking yards and international scrap market," said Sarwar Alam, also a manufacturer of Golden Ispat.
There is a good demand for steel in the local market. But there is a shortage of supply in both from the ship breaking yards and international scrap market
Manufacturers, however, cited the increased price of raw materials for rod production in international and domestic markets as the reason for the steel price hike.
Bangladesh produces around seven million tonnes of steel products annually, and for this, the country imports over 4.2 million tonnes (MnT) of scrap and billet.
Meanwhile, the local ship-breaking industries supplied around 2.5 million tonnes of scrap in 2019.
According to shipbreakers, the local scrap market is volatile too, as the import of scrap ships dropped this year due to the Covid-19 pandemic.
In 2020, it is likely to drop to 1.8 MnT as around 1.7 MnT of scraps was imported till November.