Demand in increasing at a time when shipbreaking facilities are full to capacity and could increase if more tanker owners look to sell vessels for scrap.

A broker, who preferred not to be identified, told Lloyd’s List: “We believe the main trend will be for prices to go down further to below $200 per ldt. Up to now, despite huge supply, prices have remained above $200 and relatively firm by historic standards.

“The average price between 1988 and 2001 was about $170 per ldt and prices are still above that level. But in the late 1990s yards were buying vessels for demolition for as little as $100 per ldt and we could see such prices back again.”

The broker told Lloyd’s List that downward pressure on prices was indicated late last week when two bulk carriers came back on to the market because of non-performance by the buyers at the original prices.

These included a panamax bulker that had been committed to China for $225 per ldt and a 15,000 dwt vessel that was previously sold to Indian breakers for $260 per ldt.

To date most of the ships being sold for recycling have been bulk carriers, containerships and other dry cargo vessels, but relatively few tankers.

In the first four months of 2009, some 120 dry bulk carriers and 51 containerships were sold for scrapping, but only 33 tankers.

Demand for scrapping could be boosted by increased interest from tanker owners, as tanker freight rates have fallen sharply and more single hull ships are phased out in advance of the 2010 deadline.

“We are seeing big potential for tankers seeking demolition and we have recently seen a massive amount of enquiries for pre-advice for demolition from tanker owners. So overall we expect to see very strong ongoing demand for demolition but capacity will remain limited,” the broker told Lloyd’s List.

Anil Sharma, president and chief executive of US-based cash buyer GMS, was more cautious.

“Currently, market fundamentals do not support a big fall in prices,” he said. “Indeed, we get a sense that the market may have bottomed out in the low $200s.” The main problem has been in Bangladesh, where gas and electricity shortages have forced prices down. But demolition prices have stabilised in India and Pakistan and even risen slightly in China.

But Mr Sharma agreed that if tankers start to seek demolition sales in significant numbers “that could drive prices down”.

There is still a price differential for owners seeking a sale for green recycling in China. The average dismantling price in China is about $220 per ldt, but a ship sold last week for green recycling there earned about $180 per ldt.

The actual differential depends on the size and type of individual vessels and other factors such as the hazardous material content onboard.

Shipbreakers in the Indian sub-continent are facing increased pressure to adopt greener and safer shipbreaking methods. The Bangladesh High Court has threatened to close down ship recycling yards there unless they meet certain environmental requirements.

During the first four months of 2009, some 339 ships were sold for demolition. This compares with a total of 487 during the whole of 2008. In deadweight terms, more was scrapped in the four months to April 2009 than in any of the three years from 2005-2007.

The total scrapped in period from January to April this year was some 2.9m ldt. At an average price of $250 per ldt, that would equate to an aggregate value of nearly $750m.