Containerships brace for surge in scrapping

The ship recycling market, which has been experiencing a prolonged downturn, is ready to emerge from the deadlock of the last few years.

The recovery path of scrapping is not expected to be homogeneous, as the different dynamics between the main segments of shipping create conflicting trends for the coming years. On the one hand, containerships seem to be preparing for a significant increase in the dismantling of old ships, while, on the other hand, bulk carriers continue to remain active, with limited willingness to retire.

In particular, the container transport market seems to be heading towards a period of intense restructuring, as Braemar pointed out. The large influx of new ships ordered during the pandemic, combined with the gradual return of ships to normal routes via the Red Sea and Suez Canal, is creating oversupply conditions. The expected imbalance between supply and demand is expected to put pressure on freight rates, reducing the commercial viability of older ships.

Market executives estimate that a significant number of aging containerships will be scrapped from the second half of 2026 onwards. After almost five years of minimal activity in the sector, this period is expected to mark a significant turn. This change, according to analysts, is expected to be impressive, considering the fact that containership dismantling activity in 2025 sank to levels never recorded in the last twenty years.

In particular, last year the record is considered extremely poor, as only twelve ships, with a total carrying capacity of 8,172 TEUs, were sent for recycling, while three more feeders were sold but have not yet been scrapped.

On the other hand, the large number of newbuildings, especially in the categories over 14,000 TEUs, creates a high level of fleet coverage by orders. In some categories, in fact, the orderbook corresponds to a percentage almost equal to the active fleet. The main factor that strengthens the incentives for withdrawal is the fact that the global containership fleet is aging. There are more than 500 ships over 1,000 TEUs that have exceeded 25 years of age, while hundreds more are close to this limit.

In addition, tightening environmental regulations and the increasing cost of complying with carbon emission reduction targets are expected to accelerate the process. Ships with poor energy efficiency are likely to become economically unviable in an environment of lower freight rates. Thus, recycling is expected to become a key capacity management tool for the containership industry, especially from 2026 onwards.

Braemar’s estimates are also indicative of the climate, according to which, “after years of strong profits, container shipping companies will need to focus more on managing ship capacity as the industry returns to oversupply. As a result, the overall narrative foresees increased scrapping activity, starting in the second half of 2026 and accelerating significantly through 2027.”