Tankers dominate 2021 demolition market, few container ships scrapped

Joey Daly, Cargo Analyst, has noted in a VesselsValue blog that tankers dominated the demolition market in 2021, with 301 vessels sold for scrap, accounting for 59% of all cargo vessels demolished. The comparatively low number of Bulkers scrapped last year, at 59 vessels, comprised 11% of the scrapped fleet. Only 11 Container vessels were sold for demolition. Tanker scrapping was up 242% on 2020, when 88 Tanker demolition deals were closed.

Bulker demolition sales fell to 59, from 132 vessels the previous year

Meanwhile in the Container market there was an 87% reduction in scrapped vessels, from 83 vessels in 2020, down to 11 in 2021. Scrapping rates during 2021 were at historic highs, which made the decline in 2021 unsurprising.

Bangladeshi yards demolished 232 ships, which accounted for 33% of vessels sold for recycling. India received 178 vessels for demolition, giving it a 25% market share, followed by Pakistan with 105, constituting 15% of scrapped vessels.

Turkey had a market share of 10% of vessels, recycling 70 ships in 2021.

The remaining 15% were scrapped in locations such as China, South Korea, Norway and Denmark.

Averaged across Bulkers, Tankers and Containers, the Subcontinent scrap price for steel reached highs not seen since 2007. Through 2021 the average value increased from $400/Light Displacement Ton (LDT) to $610/LDT, up by 53% year on year.

The average Bangladeshi scrap steel price for 2021 was $550/LDT, making it the highest price for scrap in the Subcontinent.

Pakistan achieved an average 2021 scrap price of $543/LDT, while India managed only $535.4/LDT.

Daly noted that the lower price for India was possibly due to 92 out of 120 Indian breaking yards achieving class society Statements of Compliance (SoC) with the Hong Kong International Convention for the safe and environmentally sound recycling of ships, which could imply higher operating costs for scrapyard owners.

These prices meant that a VLCC such as the 27,300 dwt New Diamond, with an LDT of 38,968 MT, would fetch nearly half a million US dollars more at the average annual Bangladeshi scrap price compared to selling at the average annual Indian price.

In the Bulker sector just over half (54%) were delivered to Bangladeshi yards.

Bulker rates had softened since late Q3. With EEXI regulation soon to come into force, “we are likely to see an increase in the number of Bulkers sold for demolition in 2022 as owners are encouraged to offload smaller, older and less efficient vessels”, Daly said.

Of the 301 Tankers scrapped, 112 were delivered to Bangladesh, 84 to India, and 60 to Pakistan. The breaking yards of Aliaga, Turkey, demolished 12 vessels in 2021, up from just one vessel in 2020.

There was minimal demolition activity in the Containership sector with Feedermax scrapping making up eight out of the 11 Containerships sold for scrap.

Daly concluded that the demolition markets of 2021 were characterized by many of the same factors impacting shipping as a whole; a boom in Bulker rates and values, record-breaking growth in the Containership sector, and a static Tanker market. “These elements, combined with the rallying scrap steel price, produced a strong, active Tanker demolition market, and large decreases in Container and Bulker scrapping. Offshore demolition buyers also benefitted from the strong steel price and lacklustre Offshore sector”, Daly said.

He felt that, although the steel price could be heading for a correction in 2022, continued low Tanker rates and a declining Bulker market “could spell an active year for demolition in these sectors”. Conversely, the Container and Gas markets look to stay strong, and it may not be until 2023 that a real increase in Container and Gas scrapping is observed.