The Research of the Factors That Determine the Demolition Price

Demolition price is the key indicator for the market adjacent to vessel chartering. The aim of this study is to determine the factors affecting the demolition price.The econometric model is constructed as a dependence of the price on volume and other factors. One of the main factors is steel price. The more expensive the steel is, i.e. the more expensive it is to build a new vessel, less ship-owners are likely to demolish existing vessels and the demolition price is expected to be also higher due to low supply of vessels for demolition. When oil prices are high, the fuel is expensive, it is expensive to charter a vessel, there is lower demand for vessels, thus it is better to demolish unoccupied vessel than to pay for no use; as a result, the supply of vessels for demolition rises and the demolition price is expected to go down. Another important factor are freight rates, because it is preferable for shipowners to demolish the vessel when freight rates are low. Monthly data between December 1995 and September 2018 is used in the model.