South Asian recycling yards pushed dry bulk scrap prices to about $510 per LDT by Week 39 — yet roughly 550 merchant vessels tracked exiting the Gulf at the start of July largely never reached the beach, because freight earnings beat demolition value.

That is the core finding of GMS, the world's largest cash buyer of ships for recycling, in its Q3 market review. The quarter began with conditions that pointed to a demolition surge: around 200 of those Gulf-bound candidates were bulk carriers, and yards in Bangladesh, Pakistan and India had both open capacity and appetite for tonnage.

The wave never materialized. "The quarter therefore ended with a market that had demand, but not enough willing sellers," GMS said.

Why did owners keep aging ships trading?

The answer sits in the earnings columns. By early September, the Baltic Dry Index had climbed to 3,488, its highest level since October 2021, handing older dry bulk vessels a strong commercial reason to stay in service. The tanker side went further: GMS reported some VLCC employment exceeding $1 million per day by Week 39.

At those levels, even sharply higher recycling prices struggle to compete with a vessel still capable of generating substantial revenue. GMS frames the structural point plainly: yards are not simply bidding against each other for ships — they are bidding against the money owners can make by keeping ships employed.

Owners weigh recycling offers against a broader set of alternatives, per the report:

• current freight earnings
• secondhand sale values
• remaining vessel life
• route risks
• compliance costs

How far did recycling prices rise?

The quarter opened with Bangladesh leading, at roughly $458–$463 per light displacement ton (LDT) for dry bulk tonnage and $478–$483 per LDT for tankers.

By Week 39 the leaderboard had flipped:

• Pakistan: ~$510/LDT dry bulk, ~$530/LDT tankers — market leader
• Bangladesh: ~$500/LDT dry bulk, ~$520/LDT tankers
• India: ~$465/LDT dry bulk, ~$485/LDT tankers

Pakistan offered the clearest example of scarcity at work. Gadani recyclers entered the quarter behind Bangladesh, then raised bids progressively as available tonnage tightened. By Week 34, GMS indications had reached $515–$520 per LDT for dry bulkers and $535–$540 for tankers — increases that came before enough vessels had physically arrived, leaving recyclers effectively bidding against one another for a limited pool of future candidates. Prices later eased as previously purchased tonnage reached the yards and immediate demand was satisfied, though Pakistan still closed the quarter in the top pricing position.

What about India's two-tier market?

India developed what GMS described as two distinct recycling markets. Alang generally trailed Pakistan and Bangladesh for conventional steel tonnage, but specialist vessels — reefers, gas carriers, passenger ships and units with significant non-ferrous content — could attract a different buying response.

Compliance factors are also reshaping valuations. GMS said sanctions exposure, ownership history, registries and previous trading activity increasingly determine which facilities can realistically handle a vessel and what value can ultimately be achieved. The practical consequence for owners: the highest headline recycling offer may not represent the best executable deal.

What happens when freight markets weaken?

For shippers and carriers, the near-term read is continued pressure from elderly tonnage staying in the fleet — capacity that would otherwise have left for the beach is still competing for cargoes. For recyclers and cash buyers, the opposite problem applies: strong demand, rising prices and too few ships to buy.

GMS expects recycling supply to stay tight into the fourth quarter for as long as vessel earnings remain strong, particularly where ships continue to find lucrative employment linked to the Strait of Hormuz. But deferred demolition decisions are building a larger pool of aging tonnage that must eventually exit the fleet. If freight earnings normalize, secondhand liquidity weakens or employment narrows, some of that deferred supply could hit recycling markets over a much shorter period.

"The recycling yards were ready to buy," GMS concluded. "The ships, for the most part, still had somewhere else to go."