Recycling crisis looms for aging container ships warns Bimco

Bimco’s Chief Analyst, Niels Ramussen, reveals that low recycling levels since 2021 has continued this year with only ten vessels recycled since January. Container ships 20-years-old or more now make up 24% of the fleet, he said, compared with 16% at the beginning of 2020. “As a result, we estimate that a recycling overhang of minimum 500 ships and 1.8 million teu now exists,” he declared. Historically, the Bimco analysis reveals that between 2000 and 2019, 20% of container ships were recycled before the age of 20, and 53% before they reached 25. The combination of a strong market before the financial crisis followed by a weaker market with more recycling makes the two-decade period a good reflection of recycling during average market conditions, Rasmussen said.

However, there is currently a very large orderbook and extra capacity is being absorbed by longer voyages to avoid the Red Sea as well as regulatory requirements to improve efficiency. Recycling, therefore, could well run at a higher level in the future.    Therefore, Bimco also used the recycling volumes of the weak market conditions prevailing in the 2010s, Rasmussen explained. Using this as a basis for calculation resulted in a significantly higher overhang of 850 ships and 3.1 million teu.      However, whether the number of ships is at the low 500, the higher 850, or somewhere in between, the implications for recycling yards are daunting. Rasmussen reveals that the highest-ever annual recycling occurred in 2016 when 185 ships of 600,000 teu were recycled.

“It is worth noting that the estimated overhang is larger than the orderbook for ship segments smaller than 8,000 teu,” he pointed out. “This may indicate that fleet growth in the coming years will be driven exclusively by the larger ships which, in turn, could drive further cascading of larger ships into routes where smaller ships are currently deployed.”

The boxship overhang comes at a critical time for the recycling sector. The long-awaited Hong Kong Convention came into force in June, establishing rigorous new standards for the dismantling of ships. Most Indian recycling facilities – an estimated 110 out of 120 – comply with the Convention. However, few Bangladeshi yards comply, and not a single Pakistani facility meets the Convention’s requirements.      

The conclusion that must be drawn, therefore, is that a substantial volume of additional recycling capacity is urgently needed.