We were wrong about dry bulk scrapping, again

FOR some time now, Lloyd’s List has predicted that the next year will be the year we see significant scrapping in the dry bulk sector.

The same was true in the 2025 Outlook published late last year, where an ageing tranche of panamaxes was earmarked as potential scrap candidates in 2025. Even as recently as March 2025, this author suggested the increased uncertainty presented by the next nine months, compared with a strong 2024 for the sector, may tip the balance for some of those older vessels and send them to the breakers.

That has not materialised. Put simply, rates remain high enough to warrant keeping older tonnage on the water.

Howe Robinson head of dry bulk research Bilal Muftuoglu highlighted that even in the “struggling” supramax segment, rates were “not that bad” and older vessels continued to find employment. He said his company was expecting scrapping to increase in 2024, but 2025 would not be remembered as the year of scrapping.

Similarly, Star Bulk commercial director Milena Pappas said her company was not expecting a huge amount of scrapping this year, even if she hoped there would be more, especially in the bigger sizes.

Western Bulk chief executive Torbjorn Gjervik agreed that 2025 was likely not the year scrapping would really take off.

Environmental legislation, such as FuelEU, the emissions trading system and even the new agreements made at the International Maritime Organization, have been mooted as potential drivers of greater scrapping.

But Gjervik said it was too early for those to have had any material impact. Those that wanted to trade with older vessels could simply do so in other parts of the world, he said.

The IMO regulations might act as an accelerator in the future, Gjervik told Lloyd’s List, but for now there was enough demand for older tonnage.

“We have a few more years to go before we see the real scrapping kicking in,” he said.

V.Ships group commercial and decarbonisation director Jesper Bo Hansen and Milena Pappas both said the lives of older vessels could be extended by fitting energy-saving devices or by simply slow steaming.

The other facet to this topic is that the Hong Kong Convention on the recycling of vessels, which will tighten up the recycling process and demand safety improvements, is set to enter into force on June 26, 2025.

Muftuoglu questioned the readiness of some yards, especially in Bangladesh, to comply with the convention, which may reduce yard capacity in the next few months.

Drydel Shipping chief executive Costas Delaportas said the convention might see yard capacity reduced for good, and those yards that did remain would be looking to recoup money spent to comply. All of this meant weaker scrappage prices and even less incentive for owners to wave goodbye to their older workhorses.

Despite big questions remaining on the timing of this big scrapping surge seemingly always over the horizon, MSI director Will Fray is in no doubt it is coming.

“If we have a disastrous market, yes, we’ll start to see scrapping increasing,” he said.

“And we feel that if it doesn’t happen this year, or next year, then it’s only prolonging something.”

A plateau in major commodity demand coupled with an ageing fleet means that despite a fairly modest orderbook to fleet ratio of 10%, the bulk sector “is going to have painful times at some point” when those new vessels are delivered.

“That’s bound to happen. The only thing would stop that would be some world where trade still keeps growing very strongly,” he told Lloyd’s List.

“Without those drivers from China, which we’re now quite firm aren’t going to continue as they have been doing for the past 20 years, there really isn’t anywhere else to take up the slack.

“So, if there isn’t a disaster this year, next year, then there probably will be one later in this decade and maybe you’ll see start seeing scrapping then.”

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Lloyd's List Daily Briefing 15 May 2025