This year, only 10 container ships were recycled and recycling activities have continued at a minimum level since 2021. The percentage of ships aged 20 years and above has risen from 16% at the beginning of 2020 to 24% currently, representing the highest level since the early 1970s.
BIMCO’s Chief Shipping Analyst Niels Rasmussen said, “Using the average recycling model from 2000-2019, we estimate the current recycling surplus to be 500 ships and 1.8 million TEU. Before the financial crisis, a strong market resulted in low recycling, but from 2009 onwards, a weaker market and higher recycling prevailed. Therefore, the 2000-2019 period should well reflect recycling under average market conditions.”
Historical data shows that between 2000 and 2019, 20% of ships were recycled before reaching 20 years of age, and 53% were recycled before reaching 25 years of age.
BIMCO’s analysis reveals that the actual surplus could be significantly higher. Using the recycling patterns from the weak market conditions of the 2010s, the organization estimates a maximum surplus of 850 ships and 3.1 million TEU. The large orderbook, the likelihood of Suez Canal rerouting, and efficiency regulations could cause recycling rates to rise.
Clearing the accumulated surplus will take years. The highest annual recycling on record occurred in 2016 when a total of 185 ships, with a capacity of 0.6 million TEU, were scrapped.
Alphaliner stated that the scrap market is expected to remain quiet until the decline in freight rates begins to affect shipping companies’ profitability.
“It is very difficult to accurately predict the future volume of recycling,” said Rasmussen, adding, “However, according to our estimates, 6-10% of the ships currently in trading, meaning 33-55% of ships older than 20 years, constitute a surplus. It should be noted that the estimated surplus amount is larger than the orderbook for all ship segments smaller than 8,000 TEU. This could indicate that fleet growth in the coming years will be driven only by larger ships, which could lead to larger ships entering routes currently served by smaller ships more frequently.”
