The Economics of Shipbreaking
The Price of a Dead Ship
How ships are sold for scrap by their light displacement tonnage, how cash buyers act as middlemen, and how steel prices and currencies move scrap prices.
Old ships are sold by weight.
LDT
Prices are quoted per light displacement tonne (LDT), the ship’s empty weight.
Cash buyers
Cash buyers buy ships from owners and resell them to yards, handling paperwork and final voyages.
What moves prices
- Steel prices.
- Currency rates: a weaker rupee or taka affects bids.
- Freight markets: when freight rates are high, owners keep ships longer.
Competition
Yards in India, Bangladesh and Pakistan compete for ships.
Letters of credit
Bangladesh yards faced problems opening letters of credit during its dollar shortage.
The bid
A cash buyer compares bids from Alang and Chattogram, selling to the yard offering more per tonne.
Thinking old ships are worthless
They sell for their steel weight.
Key takeaways
- Ships sell per LDT.
- Cash buyers are middlemen.
- Steel, currencies and freight move prices.
- Yards compete across countries.
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