UAE Eyes Expansion of Ship Recycling Yards Amid New Regulations
The United Arab Emirates (UAE) is being urged to accelerate the development of new ship recycling yards as demand for compliant scrapping facilities grows following the enforcement of a new regulatory framework. Market analysts say the recent rule, which came into effect on June 26, positions the UAE to become a credible player in global ship recycling if it can expand its capacity in time to meet demand.
The new UAE ship recycling regulation, introduced by the Ministry of Energy and Infrastructure, sets standards for safe and environmentally sound ship recycling. The law applies not only to UAE-flagged vessels but also to foreign ships choosing to recycle in the UAE, as well as foreign-flagged ships that make the decision to recycle while within UAE waters. State-owned ships, including naval vessels, and ships below 500 gross tonnage are exempt.
The objective is clear: to establish the UAE as a hub for green, compliant ship recycling in line with international norms. But experts caution that capacity remains limited, and substantial investment will be required for the country to scale up.
A Window of Opportunity
“Demand for ship recycling is at a low point, so this is an ideal time for the UAE to adopt the regulation and build more yards,” said Kiran Thorat, trader at Dubai-based GMS, the world’s largest cash buyer of ships for recycling. Thorat explained that while some 10 to 12 vessels call at UAE ports such as Fujairah, Khalid, and Khor Fakkan before heading to existing yards abroad, the new rules could help the UAE capture part of this flow.
Such visits are usually linked to bunkering or crew changes, he said, noting there may be a short-term dip in bunker demand as ships choose to recycle locally rather than extend their operational life through a bunkering call.
One of the first players to signal readiness is DP World’s Drydocks World shipyard, which has secured certification for ship recycling. The company said it is “currently looking at different avenues to provide solutions” to clients in light of the regulation.
“There is growing interest in developing a green ship recycling facility in the UAE,” Thorat added. At current market levels, he estimated that a 42,000 lightweight tonnage (LDT) very large crude carrier (VLCC) could generate $17.5 million in recycling value.
Competition From South Asia
The UAE faces stiff competition from South Asian recycling giants. Bangladesh remains the global leader, dismantling around 140 to 150 ships annually. India follows with 120 to 130 ships, while Pakistan handles 40 to 45 vessels each year.
The UAE, along with its Gulf Cooperation Council (GCC) peers, has the potential to handle between 300,000 and 600,000 LDT of ship recycling capacity by 2030, said Gaurav Mehta, director of Dubai-based Best Oasis, another major cash buyer of ships and energy assets. But he cautioned that realizing this target “would require a drastic change in policies and significant investment, not only from the government but also from the private sector.”
The UAE’s last known ship recycling project was in 2021, when the 500-mt barge Smit Borneo was dismantled at Ras Al Khaimah. Since then, the country has largely been absent from the recycling map, even as the need for safe, regulated facilities grows globally.
Red Sea Crisis Delays Recycling
The pace of demolition has also been affected by current disruptions in the Red Sea. With ships rerouting around the Cape of Good Hope to avoid security risks, owners are holding on to tonnage longer than usual, deferring recycling decisions.
Freight rates remain elevated. On August 25, the Platts-assessed cost to transport 270,000 mt of crude from the Persian Gulf to China on a VLCC stood at $14.86/mt, compared to $12.69/mt at the end of 2024. These stronger earnings make even older ships financially viable to operate.
Nevertheless, high metal prices continue to underpin recycling economics. Scrap steel, which accounts for about 95% of a vessel’s value, reached a 14-year peak in May 2022 before falling nearly 50% to around $450 per LDT today.
“Owners are hanging on to old tonnage,” Mehta said. Demolitions dropped to just 324 ships in 2023, totaling 4.6 million gross tonnage. “Even 25-year-old ships are still profitable to run because of strong rates linked to the Red Sea diversions.”
Ships typically enter recycling at around 25 years of age, or 20 years for high-risk tankers. Owners may also opt for demolition when repair costs, safety risks, or new regulations outweigh expected earnings.
Future Recycling Demand
Looking further ahead, analysts expect a significant wave of retirements, particularly in the LNG sector. Both Qatar and Abu Dhabi National Oil Company (ADNOC) are investing in new dual-fuel LNG carriers to support their expansion projects. These vessels will gradually replace older steam-turbine LNG ships built in the 1990s.
By the time the replacements are delivered later this decade, many legacy LNG carriers will be 35 to 40 years old. “We expect around 20 to 30 older LNG carriers to be retired and recycled after 2028, unless they are repurposed as floating storage units,” Mehta noted.
This expected turnover could provide the UAE with a long-term pipeline of recycling opportunities, particularly if it can offer modern, environmentally compliant facilities that meet both domestic regulations and international standards.
Building a Recycling Hub
For now, the challenge lies in mobilizing capital and policy support to turn potential into reality. Analysts agree that the UAE’s geography, its role as a maritime hub, and its access to strong industrial infrastructure give it an advantage. But without a significant expansion of recycling yards, much of the potential demand will continue to flow to established players in South Asia.
As Thorat put it: “The UAE has taken the right first step with this regulation. The next step is to back it up with capacity. If that happens, the country could well emerge as the Gulf’s green recycling hub by the end of the decade.”
Author: shipping inbox
shipping and maritime related web portal
