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VesselsValue demolition report for 2021

2021 saw significant trends and changes in the shipping industry with record-breaking Container demand, surging steel prices, and the threat of returning lockdowns as new Covid-19 variants emerged. These factors have combined to result in a diverse demolition market.

Last year saw 704 vessels sold for scrap overall, with a combined DWT of 26.4 million and a total scrap value of US$2.7 billion. Scrapyards have stayed busy with the total number of vessels sent for demolition climbing by 20% since 2020, and 26% since 2019, when 583 and 558 vessels were scrapped respectively.

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, whereas the 11 container vessels sold for demolition made up only 2%.

The surge in tanker scrapping represents a remarkable 242% increase from 2020, when a mere 88 tanker demolition deals were closed. Static spot and time charter rates have led to shipowners sending a large amount of older tonnage to the scrapyard, with many perhaps running out of patience awaiting a tanker recovery.

Bulker demolition sales were down from 132 vessels in 2021, a decrease of 55% due to the 10-year highs seen previously in the charter market throughout 2021, which saw owners capitalising on the unprecedented rates. However, the most impressive decline in scrapping numbers came from the container market, which saw an 87% reduction in scrapped vessels, from 83 vessels in 2020 to 11 in 2021. With rates during 2021 at historic highs, the low scrapping numbers for this vessel type are hardly surprising.

In 2021, it was Bangladeshi breaking yards working the hardest, demolishing 232 ships which accounted for 33% of vessels sold for recycling. Trailing not far behind was India, where 178 vessels were sent for demolition (25% of scrapped vessels), followed by Pakistan which received 105 vessels due for demolition, constituting 15% of scrapped vessels. Turkey accounted for 10% of vessels, recycling 70 ships in 2021. The other 15% were scrapped in locations such as China, South Korea, Norway and Denmark.

Scrap Price and Demolition Buyers

2021 was an extremely strong year for scrap steel on the Indian Subcontinent. Averaged across bulkers, tankers and container ships, the Subcontinent scrap price has reached highs not seen since 2007. From 1 January to 31 December 2021, the average value increased from US$400/LDT to US$610/LDT, representing a growth of 53%.

This strong growth follows a recent increase in demand, a consequence of the manufacturing industry’s recovery from the Covid-19 pandemic. Towards the end of 2021, prices started to decline, which could be attributed to the spread of the Omicron variant of Covid-19, threatening new lockdown measures and the slowing down of industrial activity that accompanies them.

Averaged across the three kinds of vessels, the mean Bangladeshi scrap steel price for 2021 was US$550/LDT, making it the highest price for scrap in the Subcontinent. This strong value was buoyed by the surging steel price and a relatively stable currency.

Pakistan, despite high inflation and a tumbling rupee, came in second with an average 2021 scrap price of US$543/LDT, whereas India trailed at US$535.4/LDT. This lower price is 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 infer higher operating costs for scrapyard owners.

Container shipping market

The minimal demolition activity there was in the container shipping sector was dominated by feedermax vessels, which accounted for 8 out of the 11 container ships sold for scrap (72%). The remaining three vessels were two handy boxships and one sub panamax.

Smaller vessels comprising a large portion of container shipping demolition is a trend that continues from 2019 and 2020. In both these years, feedermax and handy container ships accounted for a similar proportion of boxship demolition deals: 70% in 2019 (62 vessels) and 71% in 2020 (59 vessels).

The booming container rates of 2021 ensured that it was only the oldest tonnage sent to the scrapyard. The scrapped vessels had a weighted average age of 31 years, with the range extending from 25-year-old vessels to the 70-year-old sub panamax Lihue.

The demolition markets of 2021 were characterised by many of the same factors impacting shipping as a whole; a boom in bulker rates and values, record-breaking growth in the container shipping sector, and a static tanker market. These elements combined with the rallying scrap steel price to produce 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.

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.


Author of the article: Joey Daly - Cargo Analyst at VesselsValue

After graduating from Warwick in 2021 with a BSc. in Physics, Joey joined VesselsValue as a valuations analyst specialising in the maritime industry. Joey works closely with the research and sales teams to ensure that VV continues to deliver reliable and accurate intelligence to both clients and press.

While his recent focus has been in the demolition market, he looks to specialise in gas and sustainability.





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