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Indian recyclers appear as winners in the deluge of year-end recycling tonnage

Bangladesh, with a vast recycling capacity like India (see table below), has experienced foreign exchange problems since October 2022. Despite that, until August 2023, Bangladesh had recycled more tonnages than India. However, recent worsening FX problems could impact volumes for the balance of 2023. 

Pakistan, historically a recycler of 15%-20% of total Indian subcontinent scrapping tonnage, started facing FX problems from January 2023 after which we have not seen major sales to ship recyclers in Pakistan except for a slow resumption in demand in which some four to five ships were sold to ship recyclers in 3Q23. Will this resumption in FX availability continue for the balance of 2023?


Annual quantity of ships and offshore units recycled by Indian subcontinent – ldt in millions



% Share


% Share


% Share


% Share

2023 (until Aug)





































Due to the Russia-Ukraine war, which begun in February 2022, all net energy importing countries suffered due to the global energy price increase, exacerbated by expected supply crunch in 2022’s northern winter, based on which energy prices increased substantially from 2Q22.

Bangladesh and Pakistan were severely affected by the energy price hikes which increased their FX outflow. Rising energy prices also fuelled inflation in both countries. Their currencies weakened substantially; the Bangladesh takka lost 29% against the US dollar in the past 12 months, while the Pakistani rupee lost 55% against US dollar in the past 14 months. Government-imposed restrictions on FX availability for business activities have been manageable so far from recycling perspective since supply of tonnages was scarce.


Source: Rigzone.com


For 4Q23, various stakeholders expect increased recycling tonnages because of factors such as newbuilding deliveries and CII impact. However, FX problems in Bangladesh are intensifying. Over the past 30-45 days, tonnages have been at anchorages for long periods awaiting LC (letter of credit) opening, making shipowners impatient. Some vessels have been redirected to India for recycling.

Banks in Bangladesh are asking for 70% to 110% margins for opening LCs which puts a huge strain on cashflows. Soaring interest rates make borrowing prohibitively expensive for ship recyclers. With general elections in Bangladesh scheduled for January 2024, we expect FX problems to continue till the end of 2023 and banks may decide not to issue LCs or issue even fewer LCs from as early as September/October.

In Pakistan too, the FX problem has been severe and for a longer time, and inflation has been at 28%. FX availability only improved in August because of the release of loans from the International Monetary Fund and Pakistan-friendly nations such as China, Saudi Arabia and the UAE. However, the Pakistani rupee has already weakened by 6% since FX was made freely available, and it could weaken further. With onerous loan repayments falling due next year and its economy not yet taking off, Pakistan may not expect free availability of FX to continue for long.

Thus, there are very strong possibilities that ship recyclers from Bangladesh and Pakistan — with combined, normal purchase of about 50%-65% of South Asian recycling tonnages — may only be able to participate at some 25%-30% of their normal potential. That would require India to take up to around 80% of the tonnages that would come up for recycling on the Indian subcontinent in 4Q23, making it a buyer’s market.

We have assessed vessels being recycled at Alang, in western India, and note that there would be enough available capacity in India to accept vessels even up to 2m-3m light displacement tonnes, considerably more than expected tonnages. If ship recyclers in India become choosy, prices offered would be under pressure and there would be an element of caution when purchasing as ship recyclers would be unsure about further quantities expected for recycling.

Shipowners who plan to send their vessel for recycling in 4Q23 would gain if they send earlier for better price realisation and ease of selling; recyclers would be able to make choice of tonnages and at lower prices.

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