Econometric analysis of the ship demolition market

The topic of ship recycling has obtained considerable attention during the last two decades for a variety of reasons with the likelihood of the adoption of a new international convention under the auspices of the International Maritime Organization (IMO). This study applies econometric modeling to a unique data set to provide insight into the dynamics of the ship recycling market. The data set contains information on 51,112 ships over 100 gt and includes 748,621 events over a period of 29 years. The analysis confirms a negative relationship of earnings and a positive relationship of scrap prices for all locations while Bangladesh seems to be more sensitive to changes in earnings than the other locations and more likely demolishes larger and older vessels. The results for flag and ownership vary across scrapping locations with Malta and Cyprus indicating potential importance from a registry perspective. The overall safety profile of a vessel seems to be less important towards the probability of a ship being scrapped. Possible implementation of the convention at EU level will mostly likely affect Turkey while non-ratification of one of the major flags will most likely affect China or Bangladesh.