Container ship demolition remains at historically low levels.
Stonking charter rates have preserved the life of hundreds of boxships that might normally be considered well past their sell-by dates.
Yet that state or inertia might not last for much longer.
Oversupply will eventually impact the container shipping market, meaning demolition will be able to resume after what is already a three-year lull.
The question is when?
To answer that, eyes have turned to the world’s largest liner operator MSC Mediterranean Shipping Company.
Gianluigi Aponte’s sizeable fleet of ageing vessels has long been seen as a key driver in sparking the boxship demolition derby.
Demolition postponed
However, the unexpectedly strong market has led MSC and other carriers and tonnage providers to delay demolitions this year.
According to Clarksons Research, only 51 boxships totalling 73,000 teu were scrapped in the year up to November, with just four boxships being scrapped in October.
A total of 13,000 teu was confirmed sold for scrap in the third quarter in what was the lowest quarterly total since the boom year of 2022.
Yet things could change — and rapidly.
Niels Rasmussen, chief shipping analyst at Bimco, said that the lack of scrapping means some 3.4m teu will be more than 20 years old next year.
All will be prime candidates for recycling in the coming years, he said.
That is being factored into forecasts of container ship scrapping picking up over the next two years.
Provisional estimates suggest a threefold rise in demolition rates, from 82,500 teu this year to 240,100 teu in 2025.
Much will depend on the Red Sea crisis, but demolition could take off in 2026 with estimates of 480,500 teu.
That is where MSC will again play a crucial role.
300 older ships
Aponte’s liner business is estimated to have more than 300 ships that were built in or before 2004.
The company also has 94 ships that are at least 25 years old, ranging from 900 teu to 9,000 teu, according to Toepfer Transport.
That makes clear the massive scrapping potential of the Aponte fleet.
MSC has already been the dominant player in the container demolition market so far this year, accounting for around one-quarter of ships sold.
The bulk of tonnage sold for demolition are feeder-size vessels of up to 3,000 teu.
Demolition sales by MSC, including those of ships owned or bareboat chartered from its close partner Niki Shipping, have already totalled more than a dozen.
These include vessels over 40 years old, such as the 1,370-teu MSC Eyra and sister ship MSC Iris (both built 1982).
They were sold for green recycling earlier this year, reflecting the company’s long-standing fleet strategy of maintaining both new and older container ships.
That strategy gives MSC the flexibility of trimming capacity in tough markets by recycling the oldest vessels while still profiting from their residual scrap values.
Many more of its ships will become candidates for demolition in the coming years.
Given their age profile, most of the vessels poised for demolition are smaller.
According to Clarksons Research, up to half of the ships demolished this year, totalling 47,000 teu, are feeders. This is expected to rise to 128,000 teu in 2025 and 181,000 teu in 2026.
Secondhand buyer?
Here too, MSC is likely to play a key role by buying vessels from the secondhand market, said Toepfer Transport.
The shipbroker noted that the smallest ships in MSC’s orderbook for 2025 and beyond are 8,000 teu.
As a result, much of the replacement of older, smaller ships will need to take place in the secondhand market.
“The replacement needs for MSC in the feeder segment [are] gigantic. Goodnight to all the other buyers out there; this giant is going to ‘eat up’ tonnage for years to come,” Toepfer noted.
But MSC does not look likely to pull the trigger on the demolition market any time soon.
Analysts point to near-zero overcapacity in liner markets, with strong cargo demand playing its part. That suggests not more than 0.4% of the fleet will be removed this year.
According to Braemar container shipping analyst Jonathan Roach: “Eventually, the drivers currently protecting the charter market will erode and if demand continues to normalise, a gradual erosion in charter earnings will occur.
“But for now, demolition remains slow and is stuck on the theme of removing only the most elderly and smaller units.
“With the likelihood of a long-term closure of the Red Sea to container shipping, we have deferred the expected demolition surge until at least 2026,” he said.
