SCRAPPING of vessels remained at below-average levels in 2021 as booming containership and dry bulk rates kept older assets trading and elderly tankers were deployed to ship US-sanctioned Venezuelan and Iranian crude.

Some 265 ships of 10,000 dwt and over totalling 20.4m dwt were tracked by Lloyd’s List Intelligence as beached at yards in India, Pakistan and Bangladesh in 2021.

That compares to 307 vessels of 20.9m dwt in 2020, data show. The decline was due in part to pandemic-related recycling yard closures in India in the second quarter of the year.

Volumes of dry bulk carriers scrapped were the lowest in five years, as owners kept hold of older ships while charter rates across all sizes soared to 13-year highs over the first 10 months of the year.

Most of 58 bulk carriers recycled during the year were sold earlier in 2021, before bulk carrier freight rates began to climb significantly on the back of Chinese-led demand for raw materials.

Hardly any containerships were scrapped, an unsurprising figure given the record boom in charter rates and second-hand vessel values over the year, even for older tonnage.

Less than 1% of dwt sold for demolition comprised boxships, compared with 18.6% of crude tankers and 14% for bulk carriers.

Ships over 15 years old worth $17m at the end of 2020 were being sold for five times their value by late 2021 as demand for vessels outpaced supply. Port congestion and Covid-led supply chain interruptions lifted freight rates to new highs throughout the year.

Just eight containerships of 10,000 dwt or more were reported scrapped, compared with 75 in 2020 and 168 in 2016.

Despite dire trading conditions for the global fleet of tankers, only 100 chemical and product tankers totalling 3.8m dwt were demolished, Lloyd’s List Intelligence data show, and 50 crude tanker or floating storage and/or production tankers of 8.2m dwt.

That number is up on 2020 figures, when 20 crude tankers of 2.6m dwt and 34 product or chemical tankers of 1.2m dwt were recycled. However, this remains well below 2018 volumes of 18.5m dwt and 109 crude tankers.

Lower recycling tanker sales in 2019 and 2020 reflected volatile freight rates that touched fresh records across most asset sizes in the early stages of the pandemic when demand for floating storage on stalling oil consumption lifted demand.

These freight rates have now slumped and have barely met operating level since the final months of 2020, with protracted and depressed unprofitable conditions now seeing many owners take the decision to sell ships to cash buyers.

Compounding these numbers are three-year-old US sanctions on Venezuela’s and Iran’s oil and shipping sector. Sanctions have diverted many scrapping candidates to these trades, with a fleet of some 200 vessels aged around 20 years or more resold and then deployed for these shipments.

It is believed that if — or when — sanctions are lifted these tankers will immediately head for breakers’ yards.

Tanker owners and operators have called for increased scrapping to reduce the surplus of tonnage that has weighed on freight rates. But many might choose to wait to see whether any recovery in oil demand growth as the year progresses may finally lift demand and earnings.

“Most recyclers across the board remain keen to fill their plots, even though there is not enough tonnage going around and it seems unlikely to be a busy 2022 as compared to last year, with containers and dry bulk still flying and a feeling that the beleaguered tanker sector may also turn at some point this year,” said cash buyer GMS in a weekly report published today.

“Much may also depend on the severity of this recent Omicron wave and whether the surge in cases begins to restrict trade and movement, international travel restrictions seem imminent, and infection rates skyrocket once again.”

The lower scrapping figures in 2021 were recorded despite recycling rates hitting 13-year highs on higher steel plate prices and remaining about $600 per ldt by the year’s end, up from $260 per ldt 12 months ago.