Ship Scrapping Falls in 2026 as Record Freight Rates Keep Old Tankers Trading
The story everyone expected this year was a boom at the breaking beaches of Alang, Chattogram and Gadani. The tanker fleet is older than it has been in decades, the Hong Kong Convention finally came into force, and carbon rules are squeezing the least efficient hulls. The numbers say otherwise. Clarksons Research counts 273 ships sold for recycling from January to September 2026, about 5.5 million gross tons or roughly 8 million dwt. That is 13% less than a year earlier and about 60% below the average of the 2000s and 2010s.
So the old tankers are still at sea, working harder than ever, and for freight capacity that matters more than any rise in scrapping would have.
The reason is simple: money. The ClarkSea Index, Clarksons’ all-segment earnings gauge, hit a record $84,951 a day in the week to October 9, its fifth straight all-time high, and its 2026 average runs 70% above last year. VLCC spot earnings reached about $805,000 a day the same week, also a record, with the Strait of Hormuz disruption forcing ship-to-ship transfers in the Gulf of Oman and long detours elsewhere. At those rates a 25-year-old VLCC earns its scrap value in about a month of trading. No owner sells it to a beach.
The fleet is old, and the old part is doing the work
Clarksons puts more than 340 million gt of the world fleet at 20 years or older. That is almost a fifth of all tonnage, up from about 12% in 2021. Over 150 million gt is 25 or older, and 68 million gt has passed 30, the highest on record. Tankers have aged fastest: about 22% of tanker capacity is now over 20 years old, against 8% five years ago. Container ships sit at 16% and bulk carriers at about 12%.
For a shipper this is the hidden part of current capacity: ships that in a normal market would have been cut up in 2023 or 2024 are still trading. Recycling has stayed under half a percent of fleet tonnage a year for five years. In other words, almost nothing has left. Tight markets have been met by keeping the tail of the fleet at sea, which is cheap in the short run and fragile later.
The container side shows the same pattern from a different angle. Box carriers scrapped only about 25,000 TEU by mid-August, by Clarksons’ count, which is tiny next to an orderbook above 40% of the existing fleet. (We covered the delivery wave in Container Fleet Tops 34 Million TEU and Carriers Own 65% of It.) Diversions and Gulf disruption have soaked up the extra ships so far. When routes normalise, that capacity comes back at once, and the old ships that would usually be scrapped first are still there too. BIMCO’s projection from June 2025 is that about 16,000 ships, some 700 million dwt, will be recycled over the next decade, with annual volumes possibly passing the 2012 record (about 1,800 ships and 60 million dwt) from 2027. That forecast now reads like a backlog waiting for rates to fall.
GMS, the cash buyer, described the third quarter as a market where “the ships stayed trading” and expects supply to the yards to stay thin through the fourth quarter. Scrap prices tell the same story from the buyer’s side. Tanker offers in early October sat around $518 per light displacement ton in Bangladesh, about $510 in Pakistan and about $473 in India, with Turkey near $300, and Clarksons says subcontinent prices are up 20 to 25% this year. Yards are paying more and still getting few ships.
Sanctioned tankers are the ships that can’t leave
The one segment where demolition is rising is the one regulators like least. Clarksons counted 22 sanctioned tankers of 1.8 million dwt sold for recycling by mid-August, 58% of all reported tanker demolition sales this year. BRS Shipbrokers counts 20 “grey fleet” tankers scrapped from January to July against 11 in the same months of 2025, every one of them sanctioned.
The share looks large because the rest of the tanker market scraps so little. The pool behind it is far bigger. BRS puts the grey fleet at 1,329 tankers, about 13% of tanker tonnage, and counts 298 unaffiliated tankers older than 23 years (the average age of deep-sea tankers demolished over the past five years). The most deep-sea tankers ever scrapped in a single year was 140. Clearing just the large shadow-fleet candidates would take about two years of record activity, and that assumes they can be sold at all.
Mostly they can’t. A sanctioned ship can’t be sold for scrap by a yard that wants to stay in the dollar banking system, and owners hiding behind shell companies have no reason to hand a hull to a compliant yard that will ask who owns it. So the ships keep trading, older and less insured each year, in the Baltic, the Black Sea and off West Africa (Shadow Fleet Under Fire covers the attacks on several of them). GMS has received US Treasury licences to recycle four sanctioned ships, and the US reportedly sold two seized sanctioned tankers to it for demolition in India. GMS says a workable licensing regime could take more than 100 shadow-fleet ships a year out of service. That is a policy lever, and so far it has barely been pulled.
The rules point to more scrapping, just not yet
Three sets of rules push old tonnage toward the beach. None of them bites hard enough to beat $800,000 a day.
The Hong Kong Convention entered into force on June 26, 2025, with 24 contracting states covering more than 57% of world tonnage at the time. Ships of 500 gt and above now need an International Ready for Recycling Certificate, and yards need approval. India has about 110 yards with HKC statements of compliance and Bangladesh about 13. The convention raises the floor for how ships are broken. The price signal stays where it was.
The EU Ship Recycling Regulation goes further for EU-flagged ships, which must use yards on the European List. Two Indian facilities were proposed for the list and were still pending at the end of September. If they are added, EU owners gain a lower-cost compliant outlet and the pull toward reflagging before sale weakens.
Carbon rules are the slow lever. The IMO’s EEXI and CII rules took effect at the start of 2023; a ship rated D or E for three years running must file a corrective plan to reach C. For an old tanker, the fix is often slower steaming, which itself removes effective capacity. The bigger lever, the IMO Net-Zero Framework with its fuel standard and carbon price, is still not adopted. The October 2025 extraordinary session adjourned for a year under US pressure, MEPC 84 in April 2026 kept the framework as the basis for talks, and member states are aiming to adopt it at MEPC 85 in December. A carbon price would shorten the working lives of the dirtiest hulls. Until then, old ships are judged on freight rates alone.
What shippers and policymakers should watch
Start with the age profile, because it decides how fast capacity can fall away. The more of the fleet past 25, the sharper the drop when earnings turn and owners rush to sell. A sudden wave of tanker scrapping after a Hormuz settlement would cushion the fall in tanker rates; for container shipping, a slow scrapping response would let the delivery wave hit spot rates with nothing to offset it.
Watch the scrap price too. Rising offers with few sales, the pattern of 2026 so far, mean owners are still holding out. A jump in monthly demolition sales, with tankers leading, means the backlog has started to move, and freight rates will usually have turned a few weeks before it.
Steel is the third signal. In Bangladesh, ship breaking supplies an estimated 80 to 90% of the raw material for the country’s steel production, through about 400 re-rolling mills. A year of thin supply raises costs for builders in Dhaka and Chattogram, and that pressure lands on governments that also host the yards. India and Pakistan carry smaller versions of the same exposure.
For policymakers the open question is the shadow fleet. Sanctions keep the oldest tankers trading, at exactly the age when the risk of a spill is highest. A licensing route that lets compliant yards scrap seized or surrendered ships would remove both capacity and risk. More on the vessels and the yards themselves is at maritimeshipping.org.
The demolition boom is coming. The rates are just paying owners to wait.