SHIP recycling volumes are unlikely to recover until at least the second half of the year, as high charter and freight rates because of Red Sea diversions have reduced the supply of tonnage to the sector.

“Only strong shipping markets are responsible for the shortage of tonnage for recycling. But we have seen a lot of vessels coming from Chinese and Middle Eastern owners that are being sent for recycling. Vessels coming from these owners are generally of a poorer quality and less able to still operate commercially,” Hitesh Vyas, vice-president at cash buyer Wirana Shipping told Lloyd’s List. 

Lloyd’s List Intelligence data shows that 61 ships of a combined 805,000 gross tonnes hit recycling beaches in the first two months of 2024. This is less than half the 1.7m gt, provided by 75 vessels, beached in January and February 2023.

Vyas expects more recycling candidates to come on the market in the second half of 2024 from certain containership and dry cargo segments, in addition to the gas and vehicle carrier sectors, as more newbuildings come on stream to ease the impact of reduced tonnage supply caused by Red Sea diversions.

A shortage of tonnage has ensured relatively high prices paid for recycling candidates since 2022 are being maintained, although demand for recycled steel continues to be challenged by foreign exchange restrictions in important ship recycling nations.

“We do not expect a major increase in prices despite present market conditions,” Vyas said.

“In fact, present price levels are only because there are a lack of candidates for recycling.

“Considering foreign exchange problems faced by Pakistan and Bangladesh, there are a limited number of ship recyclers from these destinations which could manage to purchase fresh tonnage for recycling.” 

Meanwhile, India’s local steel market has been under pricing pressure for several months with recyclers only buying ships to keep their facilities active. Vyas said local steel markets are expected to improve later this year. 

Cash buyer GMS reports that major ship recycling markets were “utterly sleepy and tranquilised” in the past week with Indian subcontinent ship recyclers being provided with a “merciful collection” of smaller vessels of late.

“Given the near-total lack of market offerings, virtually no deals have been concluded, as evident from the weekly dithering traffic patterns at the various waterfronts of late, and a surprisingly lethargic India that remains puzzlingly peculiar at the bidding tables.”

“The year 2024 certainly has put the squeeze on the global ship-recycling sector,” said GMS.

It noted that most recycling candidates have been of poor condition and less attractive to recyclers due to the bad condition of their steelwork, including corroded ballast tanks. 

Only three merchant vessels were reported to have been sold for recycling in the past week. This included the 30-year-old, 28,460 dwt, handysize bulk carrier Yamtai (IMO: 9085572) which was sold by China-based owners on an “as-is” basis with handover at Singapore for $475 per light displacement tonne.

Shipping Corporation of India has sold the 26-year-old, 33,000 dwt product tanker Suvarna Swarajya (IMO: 9170432) via auction sale with handover at Colombo.

In the container sector, Chinese liner operator CU Lines sold the 525 teu, 2007-built, Far East Cheer (IMO: 9413509) to Bangladesh-based recyclers with no price being reported for this deal.