The Hong Kong International Convention for the Safe and Environmentally Sound Recycling of Ships (HKC), initially adopted in 2009, has had a protracted and intricate path to implementation. Its journey reflects years of arduous negotiations and unwavering commitment from governments, regulators, industry bodies, and NGOs to establish a global standard for responsible ship recycling.
Stagnation in Primary Demolition Markets
Progress in primary ship demolition markets remains subdued:
- India: Demand is weak due to ongoing monsoon conditions, which typically dampen steel demand and overall market activity.
- Bangladesh: Despite the landmark entry into force of the Hong Kong International Convention for the Safe and Environmentally Sound Recycling of Ships (HKC) on June 26, 2025, there has been no significant increase in demolition activity in Bangladesh. Only a limited number of yards are currently HKC-compliant, and most are fully occupied, resulting in a lack of capacity for new vessels and a subdued market.
- Pakistan: The market remains cautious despite temporary regulatory allowances for non-HKC compliant transactions. Pakistan is actively working towards HKC compliance, with belated funds approved to upgrade its Gadani shipbreaking area.
- Turkey: Continues its usual pattern of inactivity in the demolition sector.
The historical context of ship recycling in South Asia highlights severe safety concerns, with over 8,200 ships scrapped since 2009, resulting in at least 473 fatalities and 517 injuries, likely underreported due to untracked occupational diseases. Market participants hope that the enforcement of the HKC will improve safety and environmental standards, and subsequently, sentiment in the demolition market.
Demolition Trends: Dry Bulk Leads, Tankers Lag
By mid-2025, demolition activity continues to be concentrated in the dry bulk sector. Older vessels, particularly Panamax and Ultramax ships, are being phased out as owners focus on fleet renewal. This trend is driven by evolving environmental regulations, such as the Carbon Intensity Indicator (CII) and Energy Efficiency Existing Ship Index (EEXI), which penalize older, less efficient vessels, and ongoing earnings volatility in the sector. Although scrapping volumes are below last year’s levels, there is an anticipation for an increase in demolition going forward, as fleet supply growth remains below the overall trend and aging demographics support renewal.
In contrast, the tanker sector, especially VLCCs, shows weak scrapping momentum. Despite strong scrap prices and mounting compliance costs associated with new environmental regulations, many aging tankers remain in service. This reluctance to scrap older tonnage reflects a combination of factors, including owner hesitancy to dispose of assets that might still generate revenue, or their continued operation in non-compliant trades.
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Source: Breakwave Advisors
