Over the past eight quarters, ship recycling rates for bulkers, tankers, and container ships have plummeted to their lowest levels in two decades. A combination of factors, including strong market demand, low order books, and ongoing geopolitical tensions, has led to a prolonged period of minimal ship dismantling activity.
Factors Driving Low Ship Recycling Rates:
- Strong demand following market shocks, such as sanctions on Russian exports and changes in consumer behaviour during the COVID-19 pandemic, has led to extended operational lifespans for older vessels.
- Geopolitical tensions, exemplified by the security situation in the Red Sea, have further heightened demand for ships, particularly those rerouting via the Cape of Good Hope to avoid risks of attack.
Despite the low level of deliveries seen recently, some indicators point to stronger fleet development shortly. In the container sector, the new building delivery record from 2023 will be broken in 2024 and supply is expected to grow faster than demand. In the tanker sector, recent increases in new building contracting will cause deliveries to rise significantly in 2025 and 2026 while cargo volume growth could remain low.
Ship recycling will inevitably rebound in the coming years. The ships that would have been recycled if the Cape of Good Hope rerouting had not been necessary, will likely be recycled soon after the situation is resolved. 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.
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Source: BIMCO
