Falling steel prices reveal glut of demolitions to come

The declining price of steel prices are a barometer for the rise in demolitions in the container shipping sector according to Braemar, the London-based shipbroker.

Given that scrapping prices were at a high in March 2022, at US$685ldt, as vessels delivered for demolition fell to a measly four ships in the year, prices have taken a plunge as the scrappage rate has accelerated in 2023 with demolitions expected to continue to increase into 2024 and 2025.

Current prices paid by scrapyards are US$553/ldt, said Braemar, but the broker added: “From reviewing steel futures quotes, we would estimate that demo prices may drop towards US$544/ldt in Q3 2023, US$530/ldt in Q4 2023 and potentially drop below US$500/ldt sometime in Q1 2024.”

Demolition prices are set to fall as the increase in new vessel deliveries is set to rise to extraordinary levels, with carriers such as Maersk and MSC already phasing out older tonnage in preparation for the arrival of new, bigger, replacements.

Up to 11 August this year, Braemar said 57 ships totalling 110,000 TEU had been scrapped, while in the same period last year, just four ships of 2,750 TEU had been decommissioned., with Braemar estimating a total of 105 ships, a combined 207,000 TEU, is expected to be sent for scrapping by the year’s end.