Race against time: ship recycling yards prepare for HKC deadline

The Hong Kong International Convention for the Safe and Environmentally Sound Recycling of Ships is set to take effect on 26 June 2025. According to cash buyer Best Oasis vice president Yiannis Kourkoulis, while India has made significant strides toward compliance, Bangladesh and Pakistan remain notably behind.

Compliance gaps

Data from Best Oasis reveals that India, which processes approximately 1–2M tonnes of ships annually, boasts 90 HKC-compliant yards out of 120 active facilities. In comparison, only five out of 40 yards in Bangladesh and none of the 12–15 yards in Pakistan have achieved compliance, highlighting a substantial gap as the industry transitions to HKC standards.

Efforts to drive compliance have gained momentum, including the recent launch of a ship recycling alliance by BIMCO. This initiative aims to facilitate global HKC implementation and estimates more than 15,000 ships will be recycled over the next decade. 

However, industry experts caution that such efforts should have commenced at least two years ago to adequately prepare yards for the impending changes.

Current market conditions

Reflecting on the ship recycling market’s current state, Mr Kourkoulis predicts 2024 is likely to end on a similar note to 2023.

Over the past year, approximately 440–450 vessels were sold for recycling, with bulk carriers making up 35% of the total, followed by 18% container vessels, 10% tankers and 5% gas carriers. From January to September 2024, Best Oasis recorded 320 vessels heading to recycling yards, with bulk carriers continuing to lead at 36%, followed by container vessels (22%) and tankers (8%).

Mr Kourkoulis notes most bulk carriers sold for recycling were built before 2000, primarily falling within the Panamax and Handysize segments. In the tanker market, smaller vessels represent the majority of tonnage heading to demolition yards.

Despite the opportunities for recycling, current market conditions and pricing dynamics in recycling yards, coupled with a robust secondhand market, favour tonnage sales for continued trading over demolition. Vessels over 20 years old, including bulk carriers, tankers and container vessels, still attract willing buyers, as highlighted by recent reports from shipbroking firms.

Mr Kourkoulis emphasises resolving the challenges posed by the ’shadow fleet’ could significantly shift market dynamics, directing more vintage tankers to recycling yards. Market participants are closely monitoring the potential impact of Donald Trump’s second term in the White House on major events that have shaped the shipping industry in recent years, such as the Russia-Ukraine war, which has strengthened the shadow fleet.

Pricing trends

India remains the most active player in the subcontinent’s recycling market, offering rates of US$440 per ldt for bulk carriers, US$460 per ldt for tankers, and US$485 per ldt for container vessels. However, Mr Kourkoulis notes India’s robust steel industry limits its demand for additional steel from recycling yards.

Bangladesh, on the other hand, faces challenges due to ongoing political instability, leading to softer market conditions. Yards there are offering prices comparable to those in India. Meanwhile, Pakistan struggles with lower offers, with prices about US$25 per ldt below India’s levels.