Why are Billions of Dollars Worth of Ships Being Intentionally Destroyed? | Economics Explained

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This is the Carnival Imagination, a luxury cruise liner worth hundreds of millions of dollars, which just 10 short months ago was touring passengers in extreme comfort to exotic destinations all over the world.

This ship is sailing dead ahead to its final port of call, where it has been sold for scrap alongside dozens of other ships that have become the latest victims of the global pandemic.

The Chittagong ship breaking yard in Bangladesh is the largest of its kind in the world, and in the past few months even its abundant shores have become inundated with pleasure cruises and industrial cargo ships alike that all could have otherwise sailed the oceans for many more decades.

These are all very troubling signs for the unsung heroes of our modern global economy, the merchant marine fleet. Every year trillions of dollars worth of cargo is transported on ships like these and losing this fleet could turn into a huge barrier to global trade.

But what is really going on here?

Why would profit-motivated companies destroy billions of dollars worth of productive assets? Sure times are tough, tourism and trade have declined massively but this hardly looks like a reasonable response right?

I don’t burn down my house if a video gets less than 10,000 likes, so why would companies in such a competitive industry do something equally as self-destructive?

Well as always it has to do with economics (go figure) and to understand this bizarre behavior we need to understand a few key areas.

What are the economics behind the merchant marine fleet?

How do these factors make it financially viable to destroy ships?

what does this mean for the future of international trade?

And what does this all have to do with Chinese bridge building?

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[promstar]

As a former seafarer there is a tail risk from this pandemic that I think few consider. During the Covid-19 pandemic almost no countries were willing to take in disembarking crewmembers and thus many ships hade problems carrying out crew changes. I’ve heard stories of crewmembers ready to go home when the lockdown started. They stayed onboard for months. Some missed their weddings, births of their children, family members dead and buried without them being able to be there. Many will never return to the sea, some will have PTSD from this period. A global lack of seafarer can really halt the global economy. They are truly unsung heroes.

[Quickonomics]

Imagine being one of those poor guys who have to drive their ship to the scrapyard and make their way back home on foot...

[billandpech]

SUMMARY: Ships are not making much money during the pandemic while the price of iron skyrocketed due to China's infrastructure building during the pandemic. You're welcome!

[jqad]

"China is building so much infrastructure that the price of iron has rose over 300%"

flashback from Victoria II

[EconomicsExplained]

A timely reminder that everything you change in the economy changes atleast two other things.

[kevtron]

I'm not even a sailor and watching these ships get scrapped still hurts.

[ZeusTheIrritable]

The next innovation in cargo shipping: Sails.

[ezragoldberg]

Wow, in the subtitles it actually said "twice as long and twice as Thicc" Amazing attention to detail!

[matthewkelleyhotmail]

I was the Chief Fire Patrol on the Imagination for years. When I discovered this video and saw my old ship going to the breaker yard I almost cried. I have a lot of memories from my time there.

[hyperscore]

This must of been the first EE Video that didn’t mention Norway

[NickSiekierski]

It'd be great to see a breakdown of the types of goods that have dropped in demand and those that have spiked over the past year. Obviously more people than ever are shopping online and tons of things are still being shipped from China and elsewhere, but I assume the demand for heavy industrial goods, vehicles, raw materials, etc. has dropped and hasn't nearly been offset but the increase in online consumer sales.

[sayftysayfty]

In Germany, retailers are warning that there are not enough goods and to start buying Christmas presents early. I think that has something to do with your video topic. I am impressed that you have virtually predicted this.

[gaz]

Han solo: chewy, where's the millennium falcon?

Chewbacca: (in Turkey being scrapped)

[jakebrod]

“Out of fear of sounding like a Wendover Productions video” 😂😂

[bradford]

I cannot imagine the level of damage humanity will sustain from a few hundred wealthy families who have immeasurable greed. It is truly terrifying.

[Bartonovich]

The other important part about the economy of using ships is their operation also benefits from globalization. They have flags of convenience, pay minimal taxes, have cheap labour, and can be scrapped where there are few labour or environmental regulations.

[JM-]

I've been a merchant mariner for 27 years. Sailed every where I wanted to go. Industry isn't dead yet. Depends on where you work and the type of vessels. Oil field is slow and towing isn't much better. Survey is still going pretty well. Pay has been drastically reduced but I'm comfortable making 80k for 6 months of work. Being a licensed Chief engineer for the last 20 years has been fun, but unless you are ready to be gone and miss just about every holiday do your research. It's not for everyone.

[Sluggishbeef]

Let’s not forget for the last decade they made WAY too many ships. Scrap ships to raise the low prices!

[tomorrow]

And now - can’t find enough ships for the cargo - which of course does make the remaining companies more profitable

[christianknuchel]

I love how we've gotten to the point where the sensible basics of sound economic policy, such as government investment in infrastructure in times of crisis, are "big brain" moves now.