Global Ship Recycling in Limbo as Trump-Era Tariffs Spark Economic Turbulence
Global ship recycling markets are reeling from a severe shortage of scrap vessel supply, as geopolitical tensions—particularly the escalating U.S.-China trade war—continue to derail industry expectations. According to GMS’s latest report, key recycling destinations in South Asia are experiencing a dearth of tonnage, leaving demand and pricing largely stagnant despite broader economic volatility.
This scarcity comes amid a complex global economic backdrop where recycled steel pricing, freight market gains, and volatile currency exchanges intertwine with rapidly evolving political decisions. Even a 90-day tariff pause has done little to soothe the anxieties within the global shipping and recycling communities.
A Trade War Without Borders
At the centre of the economic tempest is the second-term Trump administration’s aggressive trade stance, which has driven tariffs against China to an eye-watering 245% as of last week. Chinese President Xi Jinping has responded with equally resolute resistance, suspending further negotiations with the U.S. while strengthening economic cooperation with the European Union. This alignment has sparked significant shifts in global trade flows, leaving American exporters and key industries, such as ship recycling, scrambling to adapt.
While the temporary suspension of certain tariffs was intended to calm markets, its effectiveness is now in question. The Baltic Exchange Dry Index, a leading barometer of bulk shipping costs, showed a slight weekly uptick of 1.6%, yet has dropped a staggering 24% over the past month. Oil prices, meanwhile, have surged by over 3% to USD 64.50 per barrel, fueled by a surprising reversal by OPEC+ countries, who are now cutting back production despite weakening global energy demand.
Sub-Continent Ship Recyclers Brace for Impact
In India, Pakistan, and Bangladesh—the traditional hubs for ship recycling—concerns are mounting over how these trade disruptions might trigger a flood of cheaper Chinese steel into local markets. With tariff-afflicted materials potentially being rerouted into South Asia, local recyclers fear undercut pricing and shrinking margins.
Moreover, any retaliatory tariffs or shifts in global supply chains will impact the markets where recycled steel is resold. These uncertainties make it exceedingly difficult for recycling yards to assess long-term vessel pricing trends or secure a stable inflow of tonnage.
Adding to the uncertainty is the delayed flow of older ships that had been anticipated for recycling in the second half of 2025. Many vintage bulkers and container ships from the 1990s, long overdue for dismantling, continue to stay in service amid shaky freight market improvements, thereby depriving yards of much-needed supply.
External Factors Aggravate the Crunch
Local challenges compound the industry’s broader woes. The looming South Asian monsoon season—just six weeks away—traditionally slows down recycling activity. Steel plate prices, a key revenue driver for recyclers, are showing renewed signs of weakening. Currency fluctuations, especially the U.S. Dollar’s mixed performance against regional currencies, further destabilise the pricing environment.
In Bangladesh, uncertainty lingers over regulatory timelines. Authorities have yet to confirm whether they will extend the March 31st deadline for ship recycling yards to initiate environmentally compliant facility upgrades. If the current deadline is enforced after the grace period ends on June 26th, non-compliant yards may be forced to halt operations.
Pakistan’s recyclers are also lagging in their infrastructure upgrades, while Turkey, historically seen as a fringe but resilient player in the ship recycling space, faces worsening economic fundamentals and a downward trajectory in local market sentiment.
A Tipping Point in Global Trade?
The broader implications of this tariff-fueled economic conflict reach far beyond ship recycling. Experts warn that 2025 could become a watershed moment for global trade and economic alignment. If current trends continue, we may witness the decline of the U.S. Dollar as the dominant global trading currency. Such a shift could spark widespread changes to how international trade is conducted—and who controls it.
One possible consequence is a surge in so-called “OFAC tonnage”—vessels previously sanctioned by the U.S. Treasury’s Office of Foreign Assets Control—returning to the recycling market, as global enforcement mechanisms lose their sting. This resurgence could bring not only supply-side relief but also regulatory headaches, especially in regions trying to align with the Hong Kong Convention (HKC) standards for safe and environmentally sound recycling.
The Road Ahead
In this turbulent landscape, the next few months will be critical. If global powers fail to de-escalate the current trade tensions, the economic fallout could extend far beyond shipping and steel. Protests across the U.S. already signal growing domestic unrest, as inflation, unemployment, and industrial decline bite deeper into the American economy.
For now, ship recyclers are adopting a wait-and-see approach, hoping for regulatory clarity, better freight rates, and a reprieve from the geopolitically induced market paralysis. In the interim, industry players may find it prudent to invest in facility upgrades and modernisation, particularly those not yet aligned with HKC standards, to future-proof their operations.
The global economy, much like the ageing vessels awaiting dismantling, appears to be nearing a structural reckoning. Whether it leads to a reset or a rupture remains to be seen. But one thing is clear: the trade war’s ripple effects are already reshaping the tides of global commerce.
