Middle East tensions are placing growing pressure on the global ship recycling industry, with strong freight markets restricting the supply of vessels for recycling while inflation and slowing economic activity weaken demand for recycled steel, according to Wirana Shipping.

The leading cash buyer of vessels has warned that ship recyclers are facing an increasingly difficult commercial environment as demand for steel in key recycling destinations, particularly Pakistan and Bangladesh, remains subdued despite the end of the rainy season, which would ordinarily be expected to stimulate construction activity and steel consumption.

Wirana believes the continuing Middle East conflict may be contributing to this slowdown through wider inflationary pressures and economic uncertainty, while simultaneously supporting freight markets and encouraging shipowners to keep older vessels trading rather than sending them for recycling.

The result is a double challenge for recyclers, who are struggling to secure sufficient vessels while facing weak demand for the steel recovered from those they purchase.

Rakesh Khetan, CEO of Wirana Shipping, said: “We would normally expect to see an improvement in steel demand in Pakistan and Bangladesh following the end of the rainy season, but that recovery has yet to materialise.

“The Middle East conflict is potentially affecting the recycling industry from two directions. Strong freight markets are encouraging shipowners to continue trading their vessels, reducing the availability of recycling candidates. At the same time, inflationary pressures and slower economic activity are weighing on local steel consumption.

“This creates a particularly challenging situation for recyclers because, despite weakening steel markets, they cannot simply reduce their purchasing offers when so few vessels are available.”

Wirana’s latest market report indicates that recycler offers have remained broadly unchanged across the major recycling destinations, even as domestic steel and scrap prices have weakened in Pakistan and India.

Mr Khetan added: “Recycling yards need a consistent supply of vessels to maintain their operations, but competition for the limited tonnage available means prices are not necessarily reflecting underlying steel market conditions. However, if local steel demand improves ship recyclers will have one less challenge to contend with, which will ease some of the pressure.”