The dry bulk market has seen high freight rates and strong demand delaying the recycling of older ships.
Between January and August 2024, the number of recycled ships dropped 42% year on year, the second-lowest level in 16 years, Bimco said citing Clarksons data.
Bimco shipping analyst Filipe Gouveia said: “So far this year, only 45 ships have been recycled, adding up to 2.5m dwt or 0.2% of the fleet.
“On the supply side, the fleet has continued to grow slowly, limiting fleet renewal.”
Recycling declined in all segments, with capesize and supramax experiencing the steepest fall, at almost half of last year’s figures, Bimco indicated.
Capesize rates have been robust of late, hitting a two-month peak of $28,232 per day on 9 September on the BDI. Overall, capesizes are at a year-to-date average of $23,700 per day, compared with 2023’s average of $12,500 per day, according to Jefferies.
Intermodal agreed, saying: “The supply of vessels for recycling remains low as favourable freight rates keep vessels in service, further limiting activity.”
Newbuilding drought
The dry bulk sector has seen low deliveries and a small orderbook amid limited newbuilding contracting, high newbuilding prices and uncertainty regarding new fuels, Bimco added.
Gouveia said: “In the short term, fleet renewal will not be a significant challenge for the sector. The fleet is at its oldest since 2011, but only 9% of capacity is 20 years old or above. Furthermore, that is still younger than the tanker and container fleets.”
In terms of ship demolition prices, the market continues to face significant challenges with subdued activity in all major regions, Intermodal reported.
“A combination of weak local steel demand, cheap imports and regional economic difficulties has driven down prices, resulting in a stagnant market,” it added.
The Indian recycling market remains flat with average prices at $470 per ldt for bulkers, down from 2023’s average of $522 and 2022’s $583.
Intermodal said: “Overall, the outlook for the ship recycling industry remains challenging across all regions, with no major recovery expected in the near term.”
However, Bimco predicts a rebound in ship recycling in the longer term, “when transits through the Panama Canal and the Red Sea return to normal at some point, and the market adapts to other demand shocks”.
Gouveia said: “In a weaker market, older, less competitive ships that would have been recycled over the past three years will likely be phased out. In the medium term, stricter climate policy will further encourage recycling.”
