New Era Rising for Global Ship Recycling
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Ship recycling is stepping into a new chapter. With a blend of international regulation, expanding infrastructure, and rising end-of-life vessel volumes, the sector is undergoing one of its most significant transformations in decades. The official enforcement of the Hong Kong Convention in late June 2025 is setting a global benchmark for how ships are dismantled, how materials are processed, and how workers and the environment are protected.
From Asia’s dominant recycling hubs to emerging efforts in Africa and the Mediterranean, a wave of change is taking place. At the same time, new financial instruments and contract standards are reshaping how buyers and sellers approach vessel end-of-life transactions.
Global Framework Now Active
The Hong Kong International Convention for the Safe and Environmentally Sound Recycling of Ships came into force on June 26, 2025. This marked the first time a universal standard has been applied across nations for how ships must be recycled.
Key provisions include:
- A requirement for all ships over 500 GT to carry an Inventory of Hazardous Materials (IHM)
- Approval of a Ship Recycling Plan by authorized bodies before any dismantling begins
- Obligations for recycling facilities to meet specific environmental and labor safety standards
- Ongoing inspection and certification during the recycling process
The convention applies to both flag states and port states, giving enforcement weight to coastal nations as well as ship registries.
Industry Prepares for Increased Volume
The timing of the convention’s activation is aligned with a growing wave of ship retirements. Analysts expect a noticeable increase in scrapping activity during 2025 and beyond, driven by economic, regulatory, and operational factors.
Recent observations suggest:
- Ship recycling volume is expected to rise to 3.8–4.2 million GT in 2025
- Panamax and handysize vessels account for over 75% of tonnage currently heading to yards
- Tankers and aging dry bulkers are likely to dominate in the second half of the year
- Fleet decarbonization strategies are pushing owners to retire non-compliant ships early
Although some shipowners are holding back on dry bulk vessels due to rate fluctuations, the broader trend points toward more vessels being decommissioned under structured compliance.
Activity Expands Beyond South Asia
Traditional recycling powerhouses such as Bangladesh, India, Pakistan, and Türkiye continue to dominate global dismantling. However, new geographies are beginning to enter the field with upgraded capabilities.
Recent infrastructure and yard updates include:
- Egypt’s Damietta Port planning a ship recycling facility with a projected output of 1.5 million tons of steel annually
- South Africa’s Saldanha Bay developing a facility aligned with European Union standards
- Türkiye accelerating investment in equipment to process higher-value steel and composite materials
These developments reflect a shift toward geographic diversification, driven both by demand for cleaner practices and by proximity to emerging trade routes.
BIMCO Launches New Recycling Contract
To support the new regulatory environment, BIMCO introduced RECYCLECON, a standardized contract template designed specifically for ship recycling transactions.
RECYCLECON aims to:
- Define responsibilities between sellers, buyers, and recycling yards
- Clarify environmental compliance and chain-of-custody provisions
- Reduce legal ambiguity around hazardous material handling
- Address reputational risk for owners seeking to ensure clean and ethical vessel retirement
This contract is expected to be widely adopted by owners, brokers, and ship cash buyers, especially as regulatory enforcement increases and ESG reporting grows in importance.
Macro Factors Impacting Recycling Yards
Despite positive long-term prospects, short-term operational and financial conditions are creating a mixed landscape.
Some of the main pressures include:
- Seasonal monsoon disruptions across South Asia, reducing working days at key yards
- Strength of the U.S. dollar, which increases costs for recyclers operating in local currencies
- Variable steel scrap prices, which directly influence the offered price per vessel LDT (light displacement ton)
These factors continue to affect yard profitability and bargaining leverage during vessel negotiations, especially for smaller or independent yards.
Regulatory Incentives Support Cleaner Outcomes
Governments in high-volume scrapping countries are beginning to offer incentives for compliance. This includes:
- Preferential treatment in customs processing
- Access to subsidized worker training programs
- Tax benefits for facilities aligned with international safety standards
These incentives are seen as key to accelerating adoption of the Hong Kong Convention’s provisions and preventing vessels from being funneled to non-compliant yards.
The second half of 2025 will likely show an upward trend in both the number and scale of ship recycling deals. Major shipping companies are already beginning to incorporate recycling compliance into their decarbonization strategies and long-term fleet plans.
What to watch:
- How quickly smaller yards adapt to new compliance expectations
- Whether BIMCO’s RECYCLECON gains full market traction
- How steel pricing and freight rate volatility influence the pace of scrapping
- The impact of rerouted ships and idle tonnage in increasing recycling supply
The shift is not just regulatory—it is structural, economic, and strategic. The ship recycling industry is moving away from a fragmented, opaque model and toward one that prioritizes safety, environmental integrity, and long-term viability.