In BIMCO’s recent report, ship recycling has declined dramatically, reaching its lowest level and point in twenty years. This trend is attributed to a number of factors, including market downturns, strong demand and a shortage of orders.
The economics of ship recycling
According to the report, during the first quarter of 2024, just two million deadweight tons (DWT) of vessel capacity was dismantled, marking the ninth consecutive quarter in which recycling levels have fallen below three million DWT.
[post_relacionado]BIMCO notes that this level of recycling has not been recorded since before the 2008 financial crisis, with only 0.1% of the fleet recycled in the last two years, compared to an average of 0.45% over the last two decades.
Some market shocks have contributed to this decline, such as the situation in the Red Sea, which has led to longer shipping lanes, and sanctions on Russian oil and coal exports, along with changes in consumer behavior during the COVID pandemic.
In addition, the lack of orders in the “tanker and bulk carrier” sectors has further exacerbated the lower recycling levels.
Ship recovery in the coming years
However, BIMCO anticipates an eventual recovery in ship recycling in the coming years. High newbuilding deliveries in the container sector this year are expected to lead to oversupply in the market.
It is likely that container ships that would have been scrapped due to diversions at the Cape of Good Hope will be recycled, once the situation in the Red Sea stabilizes. In addition, the tanker sector could see an increase in deliveries in 2025 and 2026, potentially boosting recycling levels.
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Source: BIMCO
Photo: Shutterstock