Ships are scrapped when they come to the end of their economic lives i.e. it costs a lot to maintain them. Some charterers will not want to charter an older ship, especially if insurance surcharges apply to cargo shipped in an older vessel. Scrapping is often hastened by low charter rates, making it difficult for owners to make a profit from older vessels. When a ship is approaching a “special survey” (usually every five years) the owner may not wish to spend money on repairs that will be necessary for that ship to pass the special survey. He may choose to scrap the ship instead.

The scrapping of a significant number of ships in a relatively short time (e.g. because freight rates or charter rates are low) means that there will be fewer of that type of ship in service. That, in turn, means that when a ship of that type is needed, the charter rate might be higher because of a shortage of that type of ship.

If charter and freight rates are high, owners will be reluctant to scrap their ships (even older ships) because they are earning good profits. This happened, for example, in the period from about 2001 to 2007 when charter and freight rates were abnormally high and some Capesize bulkers were earning around $200000 a day!

If a ship has been involved in a serious accident (e.g. collision or grounding or fire) the insurers may decide that she is not worth repairing as the repair costs are too high, relative to the value of the ship. She may then be sent for scrap.

When an owner decides to scrap a ship, a contract is entered into between the owner and a scrapyard, and the ship is sold to the scrapyard at a price per light ton, i.e. per ton of steel in the ship. The ship is delivered to the scrapyard on a specified date. Major scrapyards are located at Gadani Beach (near Karachi, Pakistan), Alang, (on the west coast of India), in Bangladesh and China. In these three major scrapyards, the ships are run up onto a beach and teams of workers with acetylene torches begin to cut the ship up. In some places, scrapping is done alongside a quay with the last part of the hull being cut up in a drydock. The steel is sent to a nearby smelter for recycling. Other useful items on board (e.g. bedding, galley equipment, furniture and electronic equipment) are sold separately by the scrapyard.

Scrap prices vary according to the number of ships available for scrapping. A regular flow of ships to the scrapyards will mean that the prices will be low, while in times of shipping booms when few ships are sent to scrap, prices will be higher.

The forward section of the tanker Tasman Spirit that went ashore near Karachi and broke in two. The forward section was refloated, and is seen here being brought to Gadani Beach for scrapping. The stern section also was refloated and sent to the scrapyard. Photograph : Captain Nick Sloane