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The last few years have seen lower volumes of recycling out of the global fleet for a variety of reasons, and remarkably strong markets in some sectors, added to Covid-19 related disruption, have kept volumes subdued in 2021. However, one part of the fleet has become a more common sight at breaking yards, as tough markets, despite recent improvements, have led to increased offshore vessel scrapping.

For the full version of this article, please go to Shipping Intelligence Network.

In the initial aftermath of the world economic downturn, global vessel demolition hit 33m dwt in 2009, followed by 28m dwt in 2010 and 43m dwt in 2011. In 2012, sales for scrap peaked at 58m dwt, and then totalled 47m dwt in 2013. At such elevated levels, compared to the annual average of 18m dwt in the 2000s, it’s worth considering how high a total might be maintained in the years ahead.

Downturn Upturn

In the first 8 months of 2014, robust levels of demolition have continued, with total sales for scrap amounting to 23.5m dwt, including 10.0m dwt of bulkers and 6.4m dwt of tankers. As the graph shows, the average age of vessels sold for scrap in the year to date stands at 27.5 years, having fallen from around 30 years in the period 2009-11 when the weak earnings environment took hold and encouraged the clear out of old ‘surplus’ tonnage.

However, with many of the units demolished coming from the larger, volume sectors where scrapping ages have generally been younger (the average age of demolition of VLCCs and Capesizes this year has been 21.0 and 24.1 years respectively), the average age of dwt capacity demolished has been lower than the average by ship number, standing at 24.7 this year.

High Profile?

Weak market conditions have ensured that owners have continued to scrap older tonnage, but, with markets by nature cyclical, to what extent could the elevated level of demolition continue in the future? Well, whilst it provides no guarantee of scrapping levels, the age profile of the fleet remains a useful indicator. In reality, market conditions, costs and timings of special surveys, and steel scrap market conditions help determine owners’ decisions, and in today’s environment fuel efficiency and regulatory concerns also play a key role. Nevertheless, the profile of fleet capacity hitting ‘average’ scrapping age gives a hint as to the direction of future demolition levels.

Help From The Aged

The graph shows historical scrapping and capacity set to reach 25 years old each year. There’s also a long ‘tail’ of capacity older than 25 years (103m dwt built pre-1989), and the graph includes a share each year. This adds up to an indicator of ‘scrap candidate capacity’. In 2017, when today’s 22 year old capacity hits 25, it reaches 23m dwt and by 2020 it is up to 35m dwt. Not all sectors have the same age profile, and many ships have a longer life than 25 years, but no doubt some younger tonnage will be scrapped too. What is clear is that more capacity was delivered in the mid-to-late 1990s than in the early 1990s and late 1980s, and this will drive scrapping at some point.

On The Level?

So, the big slump led to elevated levels of scrapping that the flattish deliveries of the 1980s and 1990s initially suggested it would be hard to maintain. However, scrapping has rolled on robustly, and the fleet’s age profile suggests that, in a few years, it may be easier to reach similar levels. Market conditions will mean that actual volumes move in cycles, but particularly with fuel and regulatory agendas to the fore, accelerated levels of demolition might become more common.


It’s not much fun being a merchant ship. You slog across the oceans with cargo, year after year, in all kinds of weather. Then just when you really feel you are developing a bit of proper expertise, suddenly they say you’re too old and must be scrapped to make way for some shiny new lump of steel fabricated in China. Where’s the stakeholder loyalty in that?

Solving the Industry’s Problem

This may sound extreme, but for many “players” in today’s shipping market, scrapping old ships is the best hope for escaping from dreary market prospects. Currently the shipyards are locked into delivering around 90m dwt of ships a year, around 5% of the already overweight merchant fleet. With plenty of spare capacity in the system, and trade growing at around 4% per annum, a quick and easy way out is heavy demolition of those geriatric old ladies.

Demographic Disaster

Unfortunately for proponents of this comfortable solution, the merchant fleet is one of the most modern on record. In a decent market most ships trade for 25-30 years, and very few are scrapped before 20 years. But if this is the criteria, there’s not much to go at, with just 6% of the total bulker, tanker and containership fleet aged over 20 years (see chart). Bulkers have the highest proportion, with 8% of the fleet in terms of dwt aged over 20 years. For tankers, it’s only 4% and containerships 3%. So for the pro-scrapping lobby, this makes life difficult.

Nil Desperandum

But luckily, there’s a second line of attack. With sky high bunker costs and environmental regulations escalating, surely the middle age ships will become obsolete, making charterers reluctant to take them. Getting rid of the 28% of the fleet in the 10-20 year age group would solve the overcapacity problem at a stroke. But are these under-age ships really unsuitable? Maybe not always.


In fact, many of these older ships are not so different from their modern counterparts. Of course the older ships don’t have electronic engines, but this is not a deal breaker and the market pays decent prices for them – $20m for a 10-year-old Supramax, compared with $31.5m for a new Ultramax resale. And even at 15 years old Handymax ships fetch $13m.

Much of the “new” fuel economy technology can be retrofitted to existing vessels and many owners are doing exactly that. Mewis ducts; hull coatings; engine modifications; lube oil management systems; and improved on-board management of fuel consumption can all make a massive difference.

Old Gold

So there you have it. Maybe a rush to the demolition yards is not the only solution to the supply overhang. A better way to exploit the highly skewed age profile of the tanker, bulkcarrier and containership fleets is to focus on their strengths. By careful retrofitting, many dirty, inefficient ships might be transformed into cost effective semi-ecoships which owners could make money from and which the IMO could be proud of. Have a nice day.


SIW1117In the 2000s new ships were the “in” thing. Public companies boasted about their youthful fleets and since ships were floating cash machines, who could argue? Why buy old ships that might break down during a boom, costing cash instead of coining it? But today youth weighs heavily on balance sheets and suddenly older ships look interesting.

Good and Old

But should they? With a surplus of tankers and bulkcarriers it would suit many investors if the old ships quietly left the market. That’s what happens in recessions – the new technology chases out the overage and obsolete ships, leaving a more efficient and eco-friendly fleet to lead the industry into the upswing. But, convenient though this would be for owners of new tonnage, realizing this scenario in today’s market faces two obstacles.

Not So Obsolete, Actually

The first is that ship technology has not changed much in the last 20 years, so well maintained old ships do not carry a big cost penalty, especially when slow steaming. On paper the new generation eco-ships might knock 10% off consumption, but many of the improvements can be retrofitted. The market seems to agree, bidding the price of a 10-year-old Panamax bulker up by 52% since the end of September 2013.

Meanwhile new ships face eye-watering capital costs. Although interest is low, bank lending margins are high and interest rates will probably rise. Also new ships face heavy depreciation. For example at today’s prices, depreciating a new VLCC, might cost $13,000 per day. Admittedly it’s not cash, but ignoring depreciation is a dangerous game.

Not Much to Scrap About

The second obstacle to ditching the old ships is that in these sectors there are not so many of them left. The normal scrapping age for merchant ships is 20-30 years, which today means ships built 1984-94. In those days there were few deliveries, and the age profile of the bulk fleet is very skewed. Only 79m dwt of bulkers and 28m dwt of tankers are 20 years old or above. At recent scrapping volumes that’s about three years of demolition. There’s another 127m dwt of 15-19 year old tonnage, but would investors pay $14.5m for a 15 year old Panamax if they thought it was a possible scrap candidate?

New Ships or Old?

So there you have it. The shipping market is in the trough and investors’ eyes are on the future. Shipyards have made headlines, recording orders for 158.2m dwt of new ships in 2013, almost 3 times as much as in 2012. With a sizeable overhang of surplus tonnage, the market is going to need all the help it can get to squeeze rates to a level which will provide some sort of profit for investors. In the last 3 years scrapping has helped by removing 37m dwt of tankers and bulkers a year. But the really old ships are now thin on the ground and the younger generation don’t look very obsolete. So don’t rely too much on scrapping to solve the surplus problem. Have a nice day.