Dry bulk ship recycling falls to 17-year low

In this week’s “Shipping Number of the Week” from BIMCO, Shipping Analysis Manager, Filipe Gouveia, looks at the recycling of dry bulk ships, which has dropped 24% at the start of the year, as high levels of uncertainty could be delaying recycling decisions.

“Between January and April 2025, dry bulk ship recycling has fallen 24% y/y, reaching a 17-year low despite a 35% y/y drop in the Baltic Dry Index (BDI). While weaker freight rates typically encourage the recycling of older and less profitable ships, high uncertainty over the demand outlook could be delaying recycling decisions,” said Filipe Gouveia.

Dry bulk ship recycling has been slow since the first quarter of 2021, when freight rates significantly strengthened due to a pickup in demand and congestion. Since then, rates have been supported by strong Chinese demand and longer sailing distances following sanctions on Russian coal. Rerouting via the Cape of Good Hope due to attacks on ships in the Red Sea has also contributed. However, so far in 2025, rates have fallen due to a weaker supply/demand balance.

While total ship recycling has decreased, it rose for the Panamax and Handysize segments, which accounted for 51% and 26% of recycled capacity, respectively. Panamax freight rates have gradually weakened since the second half of 2024, contributing to more recycling. Freight rates in the handysize segment have also weakened, although to a lesser extent.

“Amid low recycling and fleet renewal in recent years, the average dry bulk carrier is now 12.6 years old, the oldest since 2010. Furthermore, there is an overhang of 8 million DWT ship capacity, which would have been recycled under normal market conditions. Older ships are typically less profitable, as they are less fuel efficient and sail at slower speeds to comply with climate regulations,” noted Gouveia.

Currently, 6% of ships, or 3% of operating ship capacity, are over 25 years old, the age at which most bulkers are expected to have been recycled. This pattern is highest in the handysize segment, the smallest ships in the fleet, where 10% of ships or 8% of capacity are over 25 years old.

Looking ahead, ship deliveries are expected to grow by 2% y/y in 2025 and 16% y/y in 2026. Deliveries are expected to be highest in the panamax and supramax segments, which could encourage recycling of older tonnage in the smaller ship segments.

“We currently expect ship demand to grow at a slow rate, which, amid growing ship deliveries, may lead to a pick-up in recycling,” highlighted Gouveia, who went on to explain: “However, there are large upside and downside risks to both ship demand and recycling. The outcome of ongoing trade negotiations between the US and several large dry bulk importers could affect economic growth and import demand. Furthermore, if the reported ceasefire between the Houthis and the US allows for ships to fully return to the Red Sea, demand could weaken.”