In a recent report released by the United Nations Conference on Trade and Development (UNCTAD), Bangladesh has managed to retain its position as the world’s leading ship recycling nation, despite experiencing a significant 65% decrease in shipbreaking activities over the past year.
The report reveals that Bangladesh, accounting for more than one-third of the global ship recycling industry, recycled 2.8 million tonnes of ships in the 12 months leading up to January 2023. This marks a notable drop from the previous year when the country recycled 8.02 million tonnes.
Various factors have contributed to this decline, including an ongoing dollar crisis, reduced demand resulting from the near-completion of major projects, elevated scrap prices in international markets, and the Russia-Ukraine conflict.
Mohammad Taslim Uddin, the managing director of KR Ship Recycling Yard, attributed the decrease to the diminishing demand for steel products in local markets as government-led mega projects reached completion. Additionally, the Ukraine-Russia war disrupted ship imports, as Russian sources of scrap ships became unavailable.
Jahir Uddin Rinku, managing director of PHP Ship Recycling Yard and vice president of the Bangladesh Ship Breakers and Recyclers Association (BSBRA), expressed concerns over challenges faced by shipbreakers. Obtaining US dollars due to exorbitant bank exchange rates proved difficult, hindering their ability to import ships for recycling. Furthermore, the widening gap between local and international scrap ship prices added to the decline in ship dismantling activities.
UNCTAD data reveals that, in the 12 months leading up to January 2023, Bangladesh accounted for 37.2% of the world’s total ship recycling, followed by India at 32% and Pakistan at 17%. Of the ships recycled in Bangladesh, 50.4% were oil tankers, 41% were bulk carriers, 2% were ferries and passenger ships, 1.9% were chemical tankers, and 1.1% were general cargo ships, according to the “Review of Maritime Transport 2023” report published on September 27.
Comparatively, in the period from January 2021 to January 2022, Bangladesh recycled 8.02 million tonnes of ships, making up 52.4% of the world’s total. In this timeframe, nearly 57% were oil tankers, 25% were bulk carriers, and 9% were liquefied gas carriers, as reported in the annual flagship report. The report also noted that some disruptions, including financial pressures, had constrained recycling activities during this period.
However, there is optimism for the ship recycling industry in 2023. As shipping market conditions soften and issues related to letters of credit in Bangladesh ease, interest in ship recycling is expected to increase. Shipowners are likely to renew and upgrade their fleets to comply with the new Greenhouse Gas (GHG) emission regulations set by the International Maritime Organisation (IMO).
The report also anticipates a potential surge in the recycling of containerships due to an expected increase in new builds and lower freight rates in the coming years. However, the ship recycling market is expected to become more volatile, influenced by the IMO’s EEXI and CII regulations, which assess the CO2 emissions intensity of ships. Factors such as speed reduction and removal from service for ship retrofitting will play a significant role in shaping the market.
In 2022, a total of 7.5 million gross tonnes, representing less than 0.5% of the total active fleet, were sent for recycling. Despite stricter environmental rules and rising steel costs, market conditions drove shipowners to prioritize older tonnage, increasing the average value of older vessels.
Asia continues to lead in the shipping industry, with 18 of the 35 major ship-owning companies located in the region. China ranks as the second-largest ship-owning country after Greece, followed by Japan, Singapore, Hong Kong, and China. Asian countries also dominate in cargo handling performance, with 18 of the top 25 ports globally located in the region, including 11 in Eastern Asia and four in Western Asia.