The strong shipping market has prevented old ships from entering recycling centers. In the third quarter of 2023, the trend of demand for ships continued despite rising recycling prices and high demand from recyclers. This information comes from a newly released market survey.
Ship Recycling Market Status
At the beginning of the third quarter, the ship recycling market appeared to be ready for increased demolition activities. However, the strong shipping market and healthy second-hand values have given ship owners little incentive to sell to recycling centers. During this quarter, the market faced demand, but the number of sellers was insufficient.
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Demand and Recycling Prices
Recycling prices significantly increased during this quarter. At the beginning of the third quarter, Bangladesh led the market with recycling prices of around $458 to $463 per lightweight ton (LDT). However, in week 39, Pakistan rose to the top of the South Asian market, with prices increasing to about $510 for bulk carriers and $530 for tankers. Nevertheless, the supply of new ships remains limited.
The report indicates that ship owners are comparing recycling offers with a wide range of options, including freight revenues, second-hand sales opportunities, and compliance costs. This is particularly evident in Pakistan, where recyclers have gradually increased their offers.
Future Outlook for the Recycling Market
The report also notes that if shipping markets weaken, the inventory of old ships needing to exit the fleet may increase. As long as freight revenues remain strong, recycling supply is expected to remain limited in the fourth quarter as well. However, if revenues return to normal, some ships may suddenly enter the recycling market.
Currently, recyclers find themselves in a strange position: strong demand, rising prices, and few ships available for purchase. The recycling market seems ready to buy, but ships still have other destinations.
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