High Freight Rates Slow Ship Recycling and Drive Up Scrap Prices

Chartering rates, which have been breaking records in recent months, are leading shipowners to keep vessels in operation that under normal market conditions would already have been sold for recycling. This dynamic has created a shortage of candidates for scrapping at yards in India, Pakistan and Bangladesh, and has driven ship scrap prices higher.

According to data from GMS, the world's largest buyer of end-of-life vessels, yards in Bangladesh and Pakistan are once again paying indicative prices above $500 per ton after a prolonged period in the $400 range. By week 39, Pakistan had taken the lead in the South Asian market with values around $510 per LDT for bulk carriers and $530 for tankers, while Bangladesh followed with approximately $500 and $520 respectively. In India, the yards at Alang are paying lower values, around $465 for bulk carriers and $485 for tankers, though also above recent levels.

At the start of the third quarter, GMS had identified around 550 merchant vessels preparing to leave the Gulf, including some 200 bulk carriers, which pointed to a wave of scrapping that ultimately did not materialize. The strengthening of chartering markets, good resale values and employment opportunities for vessels discouraged sales for recycling. The Baltic Dry Index reached 3,488 points in early September, its highest level since October 2021, and some VLCCs achieved earnings of over one million dollars a day by week 39, according to GMS.

Clarksons Research calculated that only 273 vessels were sold for demolition in the first nine months of 2026, equivalent to about 8 million tons of deadweight, 13% below the already low pace of the previous year and 60% lower than the average of the 2000s and 2010s. As a result, more than 340 million gross tons of the world fleet are at least 20 years old, 90% more than five years ago and nearly 20% of the global fleet, up from 12% in 2021. The ClarkSea Index hit another all-time high of $84,951 per day, making it even more attractive to keep vessels operating rather than scrapping them.

GMS described the fourth quarter as an exercise in patience between recyclers willing to buy and owners who still have freight income, secondhand sale alternatives and time on their side. The company itself warned that if chartering rates normalize or employment opportunities decrease, a significant portion of this deferred supply could flow into the recycling market in a much shorter timeframe, which according to Clarksons could become a future release valve in the event of a correction in the chartering markets.