Strong freight markets keep aging vessels out of recycling yards

Strong freight markets and high secondhand vessel values are preventing aging ships from entering recycling yards. Despite rising scrap prices and available capacity in South Asian recycling markets, owners are finding it more profitable to keep older vessels in service.

In the tanker market, Very Large Crude Carriers (VLCC) and Suezmax vessels are seeing significant price appreciation. For 20-year-old VLCCs, values have increased 90% year-over-year, reaching approximately $71.1 million. This creates a massive spread compared to their scrap value of $20.8 million. Similarly, 20-year-old Suezmax values have risen 78% year-over-year to $52.1 million, against a scrap value of $11.9 million.

The dry bulk sector is also seeing strength, with the Baltic Dry Index reaching its highest level since October 2021. These high employment rates, including VLCC daily earnings exceeding $1 million in some instances, provide a strong commercial incentive for owners to continue trading rather than selling to recyclers.