Ship Recycling Market Slows as Dry Cargo Upturn Reduces Scrapping Candidates
Ship recycling has remained subdued in recent weeks, with few significant sales concluded as improving freight markets deter owners from scrapping their vessels. The slowdown follows an early-year surge in recycling sales, which now appears to have been a temporary spike rather than the start of a sustained trend.
An increase in demand for dry bulk carriers since mid-February has significantly reduced the number of ships entering the demolition market. With freight rates improving, many shipowners have chosen to hold onto their tonnage rather than sell for scrap, dampening recycling activity across the Indian subcontinent.
Early-Year Surge Fizzles Out
At the start of 2025, ship recyclers saw a notable uptick in tonnage being offered for demolition. Several factors contributed to this rise, including weak freight markets in late 2024, regulatory pressures on aging vessels, and attractive scrap prices. However, this momentum has slowed considerably in recent weeks.
Market analysts attribute the deceleration to the rebound in dry cargo markets. The Baltic Dry Index (BDI), a key benchmark for dry bulk shipping, has seen steady gains since mid-February, providing shipowners with a more profitable alternative to scrapping. Many owners who had initially considered demolition have now opted to continue trading their vessels, anticipating stronger earnings in the months ahead.
Ship Recyclers Struggle with Lower Supply
Shipbreaking yards in the Indian subcontinent—India, Bangladesh, and Pakistan—are facing dwindling supplies of tonnage as a result of this market shift. Recycling yards had been hopeful that 2025 would bring an influx of older vessels, but so far, the number of available candidates has remained modest.
Adding to the challenge, lower scrap prices being offered by recyclers have discouraged potential sellers. The price per light displacement tonnage (LDT) in India, Bangladesh, and Pakistan has softened over the past month, making demolition a less attractive option for shipowners. According to market sources, Indian yards are currently offering around $500–$525 per LDT, down from the highs seen in January.
Bangladesh and Pakistan have struggled to match India’s pricing, with financial constraints limiting their purchasing power. As a result, cash buyers have been more selective in acquiring ships, waiting for market conditions to improve before committing to purchases.
Regulatory Pressures Fail to Spur Sales
While environmental regulations and tightening emissions standards have long been expected to drive more ships into the recycling market, the latest slowdown suggests that market dynamics remain the primary force behind scrapping decisions.
The International Maritime Organization’s (IMO) Energy Efficiency Existing Ship Index (EEXI) and Carbon Intensity Indicator (CII) regulations have placed additional pressure on older, less fuel-efficient vessels. However, many shipowners appear to be postponing scrapping decisions, either investing in efficiency upgrades or trading their vessels in the improved freight market rather than selling for demolition.
Moreover, while the European Union continues to enforce strict ship recycling regulations under its Ship Recycling Regulation (EU SRR), the volume of EU-flagged ships being scrapped remains low. The limited number of approved recycling facilities under EU rules further restricts the number of ships eligible for compliant recycling.
Outlook for the Ship Recycling Market
Despite the current slowdown, industry observers believe that recycling activity could pick up again later in the year. Seasonal freight fluctuations, regulatory developments, and shifts in global demand could all impact the volume of ships heading for demolition.
One key factor to watch will be the trajectory of freight rates. If the recent upturn in the dry bulk market proves to be short-lived, more owners may reconsider scrapping as an option. Additionally, as the global fleet continues to age, a growing number of vessels will inevitably face obsolescence, creating renewed demand for recycling services.
For now, however, ship recyclers must contend with a challenging environment. With fewer vessels coming to market and declining scrap prices limiting their ability to offer competitive rates, the industry remains in a state of cautious anticipation.
“The market is very quiet at the moment,” said one ship recycling executive based in Alang, India. “Owners are holding back, and unless scrap prices improve or freight markets weaken, we don’t expect a big surge in activity anytime soon.”
As the year progresses, the interplay between freight markets and demolition prices will dictate the pace of ship recycling. For now, the sector remains in a holding pattern, waiting for conditions to shift in its favour.
