A plunge in the Indian rupee to near a record is curbing demolition of obsolete merchant vessels, exacerbating a fleet surplus in the maritime industry, according to London-based shipbroker ACM Shipping Group Plc.
“Indian scrap yards buy old tonnage from owners in dollars, but sell the scrap metal to steel mills in rupees,” ACM senior analyst Marc Pauchet said in a report sent by e-mail today. “Mills are finding it increasingly difficult to meet the prices demanded by recyclers.”
The currency of the world’s largest vessel-scrapping nation fell 1 percent to 60.24 per dollar as of 3:12 p.m. in Mumbai today, according to prices compiled by Bloomberg. That’s 0.8 percent away from its record low of 60.765 per dollar on June 26. The shortfall in India’s current account, the broadest measure of trade, widened to a record 4.8 percent of gross domestic product in the year ended March 31, official data show.
Ship owners are contending with a fleet surplus across the maritime industry that Clarkson Plc, largest shipbroker, estimated in March was the largest since the early-1980s. The Baltic Dry Index, an overall measure of commodity freight costs, averaged 847 points this year, its worst start on record, according to the Baltic Exchange in London.