Despite an international trading community clamoring for more shipping options, the first half of 2021 saw 275 cargo vessels sold for scrap. That figure is up by 40 percent compared with the first six months of last year and by 33 percent compared with 2019, according to an analysis by United Kingdom based VesselsValue Ltd.
The analysis, posted online by Guy Cooper of VesselsValue, cites “extreme scrap prices” as contributing to the high dismantling rate, with ferrous scrap trading toward the high end of its historic range throughout 2021.
Cooper also points to new emissions-related environmental regulations that have caused owners of aging vessels to conclude that (along with high scrap prices) the time was right to retire portions of their fleets. He calls it “the perfect blend to see scrapping numbers blown out of the water and some impressive records to be set.
“If steel demand continues to rally the demolition scrap price for shipping, then it is likely that scrapping numbers will increase throughout the year, especially if bulker and container rates begin to soften,” writes Cooper.
High steel pricing, he comments, “encourages scrapping but [is] bad for undersupplied sectors as it heightens new [ship]building prices.”
The 275 scrapped vessels tracked by VesselsValue have a combined 11.9 million in deadweight tonnage in cargo volume and yielded a total scrap value of more than $1 billion, the company estimates. Some 130 tankers were scrapped, along with 50 bulk vessels but just 10 container ships.
“Expectedly, container scrapping numbers are down 78 percent from 2020 as the sector relishes the extreme earnings,” writes Cooper. He adds, “Even if scrap prices continue to rally upwards, it is unlikely that we will see many more containers scrapped in the second half of the year.”
Geographically in the 2021 ship dismantling sector, Bangladesh scrapped 106 vessels in the first half of this year, up 80 percent compared with the first half of last year, according to VesselsValue. India and Pakistan scrapped 53 and 51 vessels respectively, placing them second and third globally.