CONTAINERSHIP recycling volumes have plummeted in the past month, with only one ship sold for scrap since mid-June, as Red Sea diversions mean any available vessel is finding gainful employment.

Recycling of boxships finally began to pick up in the second half of 2023 following the record low post-pandemic levels in 2021 and 2022.

However, the diversion of containerships around the Cape of Good Hope since November has meant that an anticipated major uptick in the demolition of an increasingly aged fleet has failed to happen.

The main cause of continuously low demolition sales is the persistently unsafe situation in the Red Sea. As most container lines now avoid the area and divert their vessels via the Cape of Good Hope, demand for additional tonnage to offset longer steaming distances has shot up, said Alphaliner.

“This has given an unexpected boost to the charter and freight markets, resulting in a quick dry-up in supply. Even the influx of huge newbuilding capacities delivered so far this year, and to a lesser extent, more fluid transits through the Panama Canal, have failed to destabilise the market.”

Alphaliner notes that an unexpected strong cargo demand has also played its part in mopping up containership capacity.

“As a result, owners and carriers clearly prefer to continue operating their older vessels at very profitable terms, rather than scrapping them, despite continuously strong demolition prices.”

Data tracked by Lloyd’s List shows that 38 vessels with a combined capacity of some 60,000 teu were sold for recycling since January 1, with 34 of these vessels having arrived at recycling beaches.

With most industry stakeholders now banking on continued Cape of Good Hope diversions until 2025 at least, the container shipping markets are expected to maintain their current bullish course in the coming months, noted Alphaliner.

“As a result, vessel scrapping is bound to remain low for the remainder of 2024, despite ever more stringent environmental regulations and pressure to phase out the less-efficient ships.”

Alphaliner notes that with 1.4m teu of newbuilding capacity set to hit the water between July and the end of this year, this could start taking its toll on the container market in the final quarter, when high cargo volumes generated by the annual peak season start to taper off.

“That could be a reality check for the market, eventually triggering a rally in demolition sales.”

With strong market conditions expected to prevail until at least the end of the third quarter Alphaliner forecasts total containership recycling for this year to be be 120,000 teu and 250,000 teu for 2025.

According to Lloyd’s List Intelligence data, some 10% of the containership fleet in service in ship number terms is aged 25 years or over. Almost 600 containerships in service were built prior to 2020, the data shows. In a more stable market, the majority of this aged fleet would be candidates for recycling.

However, many shipowners are continuing to trade old tonnage in the current strong market by undertaking fifth special surveys for those ships that reached 25 years of age in 2024, or are requesting extensions from class societies to delay the date of special surveys to permit them to continue in service for several more months.

The majority of ships sold for scrap this year have been feeder vessels of below 1,500 teu. Only four ships have been sold for scrap with capacities in excess of 3,000 teu.

According to Lloyd’s List Intelligence data, the largest containership sold for demolition in 2024 was the 2005-built MSC Rita (IMO: 9289116), which arrived at a recycling centre in Alang, India in March.

However, this was an exceptional recyling candidate since the vessel was declared a constructive total loss, following a serious fire off the United Arab Emirates in 2023.