Shipping Markets & Commercial Operations
Demolition Markets
Summary
The demolition or recycling market provides a terminal outlet for ageing ships and a potential downside valuation anchor.
Why this matters in ship finance
Recycling proceeds influence residual value, scrapping decisions and lender recoveries when employment is no longer economical.
The concept
Expected proceeds depend on lightweight tonnage, local steel demand, currency, destination, recycling compliance and delivery cost. A quoted price per lightweight tonne is not the net cash received.
How it is used in practice
Model scrap gross proceeds less delivery, agency and compliance costs and compare them with continued operation or sale for trading.
Practical issues
The Hong Kong Convention entered into force in June 2025; EU ship-recycling requirements have a distinct flag and facility scope. Avoid assuming every yard is admissible.
How ShipFinance.ai uses this concept
Provide a net-recycling-value floor with compliance and positioning sensitivities.
Key takeaways
- Net recycling proceeds differ from headline scrap quotes.
- Applicable recycling rules depend on flag and trading circumstances.
- Scrapping decisions compete with further employment.