Ship recycling has plummeted to its lowest point in two decades as ships are kept in operation longer due to a combination of market shocks, strong demand, and low orderbooks, according to a new report by BIMCO.
In the first quarter of 2024, just two million deadweight tonnes (DWT) of ship capacity was scrapped, marking the ninth quarter in a row where recycling levels fell under three million DWT.
BIMCO says this level of ship recycling has not been seen since before the 2008 financial crisis. Over the last two years, only 0.1% of the fleet has been recycled, compared with 0.45% on average during the past 20 years.
Several market shocks in recent years, such as the security situation in the Red Sea leading to longer sailing distances, sanctions on Russian oil and coal exports due to the war in Ukraine, and shifts in consumer behavior during the COVID pandemic, have all contributed to an increased demand for ships.
In addition, low orderbook numbers in the tanker and bulker sectors have contributed to lower levels of recycling.
However, BIMCO predicts ship recycling will inevitably bounce back in the coming years. For one, record newbuild deliveries in the container sector this year will lead to an oversupplied market. Also, containerships that would have been scrapped if not for Cape of Good Hope reroutings will likely be recycled once the Red Sea situation stabilizes. The tanker sector may also see a significant increase in deliveries in 2025 and 2026 from recent increases in newbuilding contracting, which could contribute to higher levels of recycling.
“Therefore, despite this short-term lull in recycling, we still expect that more than twice as many ships will be recycled between 2023 and 2033 than were recycled during the past 10 years,” according to Filipe Gouveia, a shipping analyst at BIMCO.
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