Despite a significant drop in shipbreaking activities by 65%, Bangladesh remains the world’s top nation for ship recycling, according to a report from the United Nations Conference on Trade and Development (UNCTAD). The country accounted for over one-third of global ship recycling, reducing its activities from 8.02 million tonnes in the previous year to 2.8 million tonnes in the 12 months leading up to January 2023.
Several factors contributed to this decline, including the ongoing dollar crisis, reduced demand due to near-completion of major projects, high international scrap prices, and the Russia-Ukraine conflict. Local shipbreakers faced challenges in obtaining US dollars due to high bank exchange rates, hindering their ability to import ships for recycling. Additionally, the rise in international scrap ship prices and the widening gap between local and international markets further contributed to the decline in ship dismantling activities.
Exploring the Intricate Link Between Freight Rates and Ship Recycling
The report revealed that in the 12 months leading up to January 2023, Bangladesh recycled 2.8 million tonnes of ships, accounting for 37.2% of the world total, followed by India with 32% and Pakistan with 17%. Most of the ships recycled in Bangladesh were oil tankers (50.4%), bulk carriers (41%), ferries and passenger ships (2%), chemical tankers (1.9%), and general cargo ships (1.1%).
However, there is optimism in the ship recycling market for 2023. With shipping market conditions softening and easing issues related to letters of credit in Bangladesh, interest in ship recycling has increased. Shipowners are expected to renew and upgrade their fleets to comply with new Greenhouse Gas (GHG) emission regulations of the International Maritime Organisation (IMO). This is anticipated to boost ship recycling, especially for containerships, in anticipation of a surge in new builds and lower freight rates in the coming years.
Ship recycling market has seen increased interest from India
Despite more stringent environmental regulations and rising steel costs, market conditions, particularly the peaks in freight rates, continue to influence shipowners’ decisions. Asia is leading the shipping fleet, with China as the second-largest ship-owning country after Greece, followed by Japan, Singapore, and Hong Kong, China. Hong Kong, China, is the world’s fourth-largest flag state of registration in terms of deadweight tonnage, with Singapore taking fifth place. Other countries like Indonesia, the Republic of Korea, India, and Vietnam also feature in the top 35 flags of registration.
