Economic life

Economic life is the period over which a ship remains profitable to operate, as distinct from its physical or technical life. It is set by the point at which rising maintenance, fuel inefficiency, tightening regulation, and falling earnings make continued trading less attractive than scrapping or sale. Most merchant vessels are assumed to have an economic life of about 20 to 25 years, with tankers and bulkers often demolished around 20 to 25 years and shorter where market or class survey costs bite. The figure drives depreciation schedules, loan tenors, and the residual or scrap value used in investment appraisal.