Following new regulations, the UAE is looking to expand its ship recycling capacity to meet the growing demand from ship owners looking to scrap older vessels. The new rules aim to promote safe and environmentally responsible ship recycling.
New UAE Recycling Regulations
Effective since June 26, the UAE’s new ship recycling regulations apply to all ships flying the UAE flag and to all foreign ships recycled within the country. The regulations also apply to foreign-flagged ships whose decision to recycle is made while in UAE waters. The goal is to encourage the development of compliant recycling facilities, but the rules do not apply to state-owned ships or those with a gross tonnage under 500 mt.
Current State of the Industry
Demand for ship recycling is currently low, which, according to market analysts, makes it an opportune time for the UAE to adopt these regulations and foster new recycling yards. While a few ships currently use UAE ports for services like bunkering before heading to recycling yards, the country has only recycled one known ship since 2021. This highlights the significant need for new facilities.
Market Leaders and Future Potential
Globally, Bangladesh leads the ship recycling industry, handling 140 to 150 ships annually, followed by India and then Pakistan. While the UAE and the broader GCC region have the potential to process between 300,000 and 600,000 lightweight tons (LDT) by 2030, this would require substantial investment and policy changes from both the public and private sectors.
Factors Influencing Recycling Demand
Several factors currently influence the demand for ship recycling. Geopolitical disruptions, such as those in the Red Sea, have forced ships to take longer routes, making it profitable for owners to keep older vessels in service longer. This has led to a sharp decline in recycling activity. However, high metal prices can make demolition more attractive, as scrap steel accounts for about 95% of a ship’s value. Future demand for recycling is expected to increase after 2028, driven by the replacement of older LNG carriers with new, more efficient dual-fuel ships.
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Source: S&P Global
