End of life

Ship recycling and demolition

Published 28 August 2026 · updated 17 October 2026

Every ship ends as steel. Its last sale is not the sale of a cargo carrier. It is the sale of several thousand tonnes of steel plate with an engine inside. It is priced in a unit that appears nowhere else in chartering.

The unit is LDT, and it is not deadweight

Demolition prices are quoted in US dollars per light displacement tonne (LDT). This is the weight of the ship itself, empty: no cargo, no fuel, no stores and no ballast. The recycling yard is buying that weight, because it is roughly what the ship will give in steel and equipment.

LDT is different from every other tonnage in the ship’s particulars. Deadweight is what the ship can carry. Gross tonnage is a measure of volume, used for port dues and regulation. Light displacement is what the ship weighs. A newcomer who applies a scrap price to deadweight will get a figure that is too high by a large factor. This mistake is common, so check the unit on any demolition figure before you repeat it. Vessel particulars explains how the three tonnages relate.

Two things follow. First, a heavily built ship is worth more than a light one of the same deadweight. That is why older ships and some ship types recycle for more than their carrying capacity suggests. Second, the fuel (bunkers), lubricants and stores left on board are bought separately. They add a real amount on top of the LDT price, just as on an ordinary sale and purchase deal.

How the price is assessed

Scrap ships are not traded on an exchange. Instead, the Baltic Exchange publishes weekly recycling assessments. Panellists, who are demolition brokers, supply them on a fixed basis: per long ton light displacement, for a tanker within a stated lightweight range, gas free for man entry (safe for people to enter), delivered to the Indian subcontinent within a stated period, as is, under its own power, cash price. Each of these conditions is there because changing it changes the price.

What moves the price is mostly local, and mostly not shipping. From week to week, these matter more than the world freight market: steel plate prices in the recycling country, the currency, whether banks are opening letters of credit, space and capacity at the yards, and the monsoon season. This is why the demolition market can be strong while freight is also strong. This seems strange, but the buyer is in the steel business, not in shipping.

The cash buyer

An owner usually does not sell directly to a yard. The owner sells to a cash buyer. This is a specialist company that buys the ship outright, pays the owner, takes delivery, then arranges the last voyage and sells the ship on to a recycling yard.

The cash buyer earns a margin by taking risks the owner does not want. It takes the price risk between buying and reselling, which can last weeks. It takes the delivery voyage, in a ship at the end of its life, with a small crew and no cargo. It often changes the ship’s flag and name for that voyage. It also separates the shipowner, in reputation and in law, from the beach where the ship is broken up.

That last point matters, because many owners, charterers and lenders now publish policies on where their ships end up. The contract with the cash buyer decides whether those promises are kept. An owner who sells "as is" to a middleman and asks no more questions has passed on the ship, but not the responsibility.

The last voyage confuses the register

Final voyages produce data that looks broken but is not. Ships get short, temporary names, sometimes one syllable or two letters, and move to a flag registry that accepts a single voyage. Class may be withdrawn, and AIS reports become irregular and then stop. The registered owner changes to a company nobody has heard of, because that company exists only to own one ship for six weeks.

The one thing that does not change is the IMO number. That is why a register keyed on the number survives the end of a ship’s life, and a register keyed on names does not. Ship names and renaming covers the general problem. Demolition is where it is worst, because several identifying fields change at once and none of the changes are errors. Flag states explains why the flag is the field most likely to change.

The rules that now govern it

Two sets of rules matter, and they are related but not the same.

• The Hong Kong Convention. This is the International Maritime Organization's convention on safe and environmentally sound ship recycling. It was adopted in 2009, came into force on 26 June 2025, and applies to ships of 500 gross tonnage and above on international voyages. It requires a ship to carry an inventory of hazardous materials, kept up to date through its life. The ship must be recycled at an authorised yard, under a ship recycling plan written for that ship and that yard.
• EU Regulation 1257/2013. The European ship recycling regulation goes further for the ships it covers. A ship under an EU flag must be recycled at a yard on the published European List. The inventory rule also applies to non-EU ships calling at EU ports. The regulation has applied in full since the end of 2018, well before the convention came into force.

The Basel Convention on moving hazardous waste between countries also applies. In some cases it treats an end-of-life ship as waste. This conflict between the rules explains the careful wording in a demolition sale. It also explains why a seller sometimes sells a ship "for further trading" when the seller does not want to be the one who declares the ship finished.

BIMCO publishes RECYCLECON, a standard contract for selling a ship for green recycling (recycling that meets safety and environmental rules). It was written alongside SALEFORM, and it puts the convention's requirements into the sale contract itself.

The decision, and why it stabilises the market

An owner decides on demolition by comparing two numbers. The first is what the ship will sell for per LDT today. The second is the cost of keeping it trading: the next special survey and drydocking, any conditions set by the class society, work to meet ballast water and emissions rules, and what the ship is likely to earn. At the moment the question comes up, the market is usually poor.

When the yard bill is more than the ship’s remaining value plus its expected earnings, the ship goes for scrap. This calculation makes the oldest ships too expensive to keep first, and the effect is strongest at the bottom of the market. So demolition removes supply exactly when there is too much of it. It sets a minimum level for second-hand prices, and it is what ends a downturn. Shipping cycles describes the wider pattern. This is the part of it that actually takes ships out of the fleet.

References

• International Maritime Organization, The Hong Kong International Convention for the Safe and Environmentally Sound Recycling of Ships. imo.org
• International Maritime Organization, New era for ship recycling as Hong Kong Convention enters into force, 2025. imo.org
• Regulation (EU) No 1257/2013 on ship recycling, 2013. legislation.gov.uk
• BIMCO, RECYCLECON. bimco.org
• Baltic Exchange, Guide to Market Benchmarks, 2026. PDF

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