Boxship Drought For Recycling Yards Amid Red Sea Crisis

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The Red Sea crisis and the higher freight and charter rates are discouraging owners from scrapping older boxships, resulting in a dearth of tonnage being sold for demolition, despite cash buyers offering higher prices.

Slow Rate

While January saw 13 container ships of nearly 22,000 TEUs being torched, scrapping has slowed. Just three boxships (MTT Singapore, MTT Tanjung Manis, and Dong Fang Xing) were recycled in February and so far in March, just two container vessels (Far East Cheer and Mapocho) have been broken down. The majority of the ships were built in the 1990s and were in the sub-Panamax sizes.

Mapocho belonged to German mainline operator Hapag-Lloyd, which in May 2023, disclosed that it plans to scrap several ships in a two-year timeframe, as these vessels have reached the end of their lifespan.

Since that time, Hapag-Lloyd has demolished four ships, including Mapocho. Drewry’s senior manager (container research) Simon Heaney told Container News that the current uptick in charter and freight rates is deterring scrapping, but things could change once the Red Sea situation abates.

Incentives Lowered

Heaney said, “As long as the Red Sea crisis persists, the incentive to scrap older ships will be considerably lower than it would have been. The situation has boosted freight rates, time-charter, and second-hand valuations so the motivation to demolish simply isn’t there.
“Drewry thinks that will change shortly after the resumption of Suez crossings because the market will be even more exposed to the structural overcapacity, but the timing is very hard to predict.”

The largest cash buyer of ships for recycling, Global Marketing Systems said that despite rates of US$520/ldt to US$550/ldt being offered, this has been inadequate to tempt ship owners to part with older vessels.

Global Marketing Systems stated, “Containers and tankers too remain oddly off the recycling buffet and this in turn is driving the ongoing dearth of viable candidates into overdrive, as chartering rates continue to hold through a time that many had been expecting them to falter with the turn of the year. Global economies certainly have the trigger-happy Houthis to thank for the aggression in the Red Sea lanes.”

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Source: Container News