Bulker demolition has surged in recent years as the market has weakened. While scrapping volumes are still significantly lower than deliveries, the rise in recycling has nonetheless slowed fleet growth somewhat. Given that the average age at which ships are scrapped has also trended downwards in recent years, this increase in demolition has con-tributed to a change in the bulker age profile.

Up to the Scrap Heap
Between 1996 and 2003, on average 3% of the fleet each year was scrapped. As shown on the Graph of the Month, demolition was very low in 2004-2008 as bulker earnings rose to unprecedented highs. While scrapping rose slightly in 2009, it was not until 2011 when earnings had fallen to much lower levels that demolition surged. In 2012, a further 43% y-o-y drop in average bulker earnings to $6,273/day drove demolition to a record 33.7m dwt in the full year.

Elderly Pressures
Perhaps unsurprisingly given that only the eldest ships were scrapped in the boom, the average age of vessels demolished has recently dropped, falling by 10-15% in each bulker sector in the last 4 years. Part of this drop may have been due to the narrowing differential between scrap values and prices of elderly secondhand ships. In early 2010, the scrap value and 20 year old price of a Capesize stood at $7.4m and $18m respectively, but in March 2013 both were around $8-9m. In the same period, the average age at which Capesizes are scrapped has fallen from 26 to 22. The differential has also narrowed in the smaller sectors, and this is likely to further support recycling of younger ships in the near-term.
The relatively elderly age profile of the Handysize fleet has also supported scrapping, with Handysizes accounting for 24% of demolition last year but only 14% of bulker tonnage at start 2012. At start 2009, 50% of Handysize tonnage was over 20 years old, but this has now fallen to 26% as the severe market downturn has finally resulted in many of these older vessels being removed from service.

Working Out for a Flatter Profile?
The overall effect on the bulker age profile has also been significant. At start 2010, 24% (109m dwt) of the bulker fleet was aged over 20 years, but this has now fallen to 10% (73m dwt). This means that there is now the same proportion of tonnage aged over 20 years than between 10-14 and 15-19 years, with a huge 70% of the fleet less than 10 years old. Given that much of the overhang of very old tonnage has been removed from the fleet, this youthful age profile could have long-term implications if the ability of owners to adjust supply by scrapping is somewhat more limited.
In the short-term, there remains a decent volume of scrapping potential, especially in the Handysize sector. The weak market is projected to support firm demolition of 29m dwt this year, but it seems clear that beyond the short-term, changing market conditions and the evolving bulkcarrier age profile will have an effect on the age and volume of scrapped vessels.