The Economics of Shipbreaking
Shipbreaking and Freight Cycles
How shipbreaking volumes rise when freight markets are weak and owners scrap old ships, and fall when freight rates are high, as after COVID-19.
Shipbreaking follows freight cycles.
Weak freight
When freight rates are low, old ships lose money, so owners scrap them.
Strong freight
When rates are high, owners keep even old ships running.
COVID effect
Freight rates soared in 2021-22, so few ships were scrapped, hurting yards.
Red Sea
Longer routes around Africa from 2024 raised demand for ships, again reducing scrapping.
Yards’ income
Yards face boom and bust cycles.
Economics
Scrapping reduces supply of ships, which can help lift freight rates.
In 2021, Alang's beach had fewer ships because high freight rates kept old vessels sailing.
Freight markets strongly influence timing.
- Scrapping rises when freight is weak.
- High freight keeps old ships sailing.
- COVID freight spikes cut scrapping.
- Yards face boom-bust cycles.
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