Breaking News

Breaking News Ship scrapping expected to go on a tear in coming years.

By Chris Dupin

      The drop in world trade, overcapacity of containerships and other vessel types, a 2010 phaseout of single-hull tankers in many trades, and dry    bulk freight rates far below last year's records, are expected to result in a sharp increase in ships scrapped in the next few years.
      Anil Sharma, president of Global Marketing Systems (GMS), a Cumberland, Md.-based company that claims to be among the largest cash buyers of ships for recycling, said there has been a marked increase in the number of ships heading for the breakers, even as scrap metal prices have come off their highs last year. While 300 to 400 large ships are scrapped in most years, he said in 2009 the number could climb to 1,000, and the scrap-happy boom could continue into 2010 and possibly 2011.
      'I'm seeing an average of three ships a day ' some days there are 10 or 15,' Sharma said in a telephone interview from Dubai. The conversation was paused several times as he fielded calls from brokers about vessels offered for sale. Many dry cargo and containerships have been offered for sale early this year and he expects car carriers and tankers too as the year continues.
      Clarkson Research in London forecasts that about 39.3 million deadweight tons of all sorts of ships will be scrapped in 2009, compared to 13.4 million dwt in 2008, said analyst Calum Kennedy. Most of this, about 22.7 million dwt, will be older bulk vessels whose lives were extended beyond the typical retirement age of 24 to 25 years because of last year's record dry bulk freight rates.
      Clarkson also expects 2.4 million dwt of containerships, representing about 120,000 TEUs of carry capacity, will go to the breakers. That's a record for containerships, which tend to be longer lived than most vessels.
      Shipbreaking or recycling is concentrated in a handful of countries ' Bangladesh, India, Pakistan, China and Turkey, with estimates that 80 percent to 90 percent being concentrated on the Indian Subcontinent. Last year Clarkson said about 7.1 million dwt were scrapped in Bangladesh, 3.5 million dwt in India, 1.1 million in China, and 600,000 in Pakistan.
      A number of organizations, including the NGO Platform on Shipbreaking, are already critical of the way shipbreaking is done on the subcontinent, where ships are driven up onto beaches and cut apart, and are worried the scrapping surge will just make things worse.
      A major new treaty regulating ship recycling, the International Convention for Safe and Environmentally Sound Recycling of Ships, has been developed over the past several years by the International Maritime Organization, and will be the subject of a diplomatic conference in Hong Kong in May.
      The IMO said the proposed convention has three aims:
      ' 'Design, construction, operation and preparation of ships so as to facilitate safe and environmentally sound recycling, without compromising the safety and operational efficiency of ships.
      ' 'The operation of ship recycling facilities in a safe and environmentally sound manner.
      ' 'The establishment of an appropriate enforcement mechanism for ship recycling, incorporating certification and reporting requirements.'
      Ships being sent for recycling will have to prepare inventories of hazardous materials used in their construction and must be surveyed prior to going to the breakers.
      Ship recycling yards will also have to provide a plan specifying the manner in which each ship will be recycled, and the countries that are party to the treaty will be required to take effective measures to ensure that scrapyards under their jurisdiction comply with the convention.
      IMO Secretary-General Efthimios Mitropoulos hailed the draft convention after it was approved by the IMO's Marine Environmental Protection Committee last October, saying it 'represented a major milestone in IMO's quest to ensure that ships reaching the end of their operational lives do not pose any unnecessary risk to human health and safety and the environment.'
      Mitropoulos said the IMO had cooperated with both the International Labor Organization and the relevant bodies of the Basel Convention on ship recycling in developing the new draft convention. The Basel Convention is a treaty that seeks to regulate trade in hazardous substances from developed to developing countries.
      Jeffery Lantz, director of commercial regulations and standards at the Coast Guard, said the U.S. government 'supports anything that improves safety and the environment' in the ship recycling industry, and feels the requirement for identifying and inventorying hazardous materials will help ship breakers 'know exactly what they have to deal with so they can take appropriate action and deal with them to prevent environmental damage and protect workers or take materials off the ship before they are recycled.'

'If your state ratifies the convention and enforces it, then there will be a knock-on effect in terms of the improvements to industry. If you are substandard at the moment, you are going to have to raise your game.'

John Stawpert marine advisor, International Chamber of Shipping

      The convention also has the support of International Chamber of Shipping (ICS), which has been working on the recycling issue for more than a decade.
      'We fully support the convention. It has always been our position that a global solution was needed to the ship recycling problem and that regional solutions or legislative frameworks could be circumvented,' said John Stawpert, marine adviser at the ICS. 'We feel the convention will offer a global regulation that will not unnecessarily penalize players, but will encourage the industry to improve its practices when selling ships and particularly when breaking ships, particularly with respect to protecting the safety and health of workers and protecting the environment.'
      He said the convention will place requirements on ship recyclers having to do with waste disposal, waste handling, worker safety and training, and emergency preparedness and response.
      'If your state ratifies the convention and enforces it, then there will be a knock-on effect in terms of the improvements to industry. If you are substandard at the moment, you are going to have to raise your game to meet those benchmarks,' Stawpert said.
      But the NGO Platform on Shipbreaking and some of its members take a far different view, feeling the treaty will do little to correct what they believe are hazards to workers and the environment at many breaking yards.
      'Even before the slowdown in trade we were concerned about a tsunami of ships hitting the beach because of the single-hull tanker phaseout. That has not created the calamitous peak that we were fearing, but with the economic downturn and less trade there will be more inclination by ship owners to retire the oldest part of their fleet,' said Jim Puckett, executive director of the Basel Action Network (BAN), a Seattle-based organization that battles trade in waste and hazardous substances.
      He complained that 'ship owners got away with a big one here ' they ran away from the Basel Convention and went to the IMO where they had a more favorable venue, and created a treaty that is not much more than greenwash.'
      Puckett said the treaty goes against the principles of the Basel Convention, which seeks to prevent the export of hazardous waste from the developed world to developing countries.
      The NGO Platform on Shipbreaking, BAN and others are calling for an end to the practice of breaking ships on tidal beaches in places like Chittagong, Bangladesh; Alang, India; and Gadani, Pakistan.
      While Sharma said the ability of breakers to beach ships in these locations is viewed by some as 'God's gift,' Ingvild Jenssen, director of the NGO Platform, and Puckett said it is fatally flawed for several reasons:
      ' Breaking takes place on soft sand and sometimes flooded beaches, making it impossible to bring emergency equipment like ambulances and fire trucks to the scene of accidents.
      ' Cranes cannot be used on the beach, which means that metal parts have to be lifted by hand and are often dropped into the sea.
      ' Slag and toxic materials such as asbestos, bunker fuel and parts contaminated with PCBs sometimes get into the water and there is no way to contain such materials once they are on the beach.
      Jenssen of the NGO Platform said a study released last year by members of her group found about one-fifth of Bangladesh's workers are under the age of 15. Workers are injured in explosions if ships are not made gas free before cutting of metal begins, from falling metal, and from toxic substances like asbestos, she said.
      'Some of our strongest supporters come from the shipyard workers who built these ships and are now sick' from exposure to toxic substances used in their construction, such as asbestos, she said.
      'The beaching question is one that has always been there, but it has come into prominence again,' Stawpert said. 'Nobody wants to see unsafe practices and nobody wants to see dumping into the environment, but at the same time, I don't think anybody wants to see literally hundreds of thousands of people in these places put on the breadline, having their industry removed from them overnight.
      'What needs to happen is a process to facilitate change to move away from unsafe practices, and the IMO convention is the only serious thing on the table to achieve that end. We believe as more states ratify it and awareness grows, then those changes will begin to make themselves felt,' he said.
      'While beaching may or may not be safe or environmentally friendly at the moment, there is nothing to say that certain improvements in infrastructure that may in fact be quite basic will change the face of that practice, and move it a little further inland so that the industry doesn't necessarily move from the regions where it is currently carried out, but the breaking practice is conducted in a safer and contained manner.'
      Puckett complains that facilities will not be audited and inventories of hazardous materials, while useful, will not mitigate their harmful effects in any way. One of the best features of the treaty, he said, is that it will require ships to be gas free before demolition. Already a requirement in some countries, he said this was a 'no brainer.'
      He believes it is very unlikely that countries that are parties to the Basel Convention would allow the IMO to totally regulate ship recycling and vessels may be subject to both treaties.
      But Stawpert said the industry is hopeful that parties to the Basel Convention will see compliance with the new IMO ship recycling treaty as equivalent to compliance with the Basel agreement for ships.
      Lantz said it is not clearly how quickly the new treaty will come into force. At the convention in May, delegates will decide how many countries and what portion of the world fleet must adopt the new treaty, and there will likely be a requirement that nations representing a certain share of the world breaking capacity approve it.
      Sharma said there are 'wrong perceptions and misleading information' about ship recycling in the Indian Subcontinent, and thinks some of it comes from 'those who would gain if the industry would move back to some of the other places.'
      India 'has taken steps to correct itself and that the Supreme Court of India has developed strict guidelines on what ship recyclers must do,' Sharma said. 'Bangladesh is still behind, but trying to catch up, but I was on a recent trip with representatives from the IMO and they said things were far better than they expected.'
      Reforms were ordered by the Supreme Court in the wake of a controversy over France's plan to export the aircraft carrier Clemenceau to India in 2005 for demolition. That brought protests from environmentalists and eventually an order from India's Supreme Court that the carrier could not come into the country. The ship is now awaiting demolition in Hartlepool in the United Kingdom, where a former shipyard is being developed into a recycling facility.

Anil Sharma president, Global Marketing Systems
'There are too many sticks, but almost no carrots to this industry. This industry is not subsidized by anyone, by government or grants or anything like that. On the contrary, it is highly competitive.'

      'There are too many sticks, but almost no carrots to this industry,' Sharma said. 'This industry is not subsidized by anyone, by government or grants or anything like that. On the contrary, it is highly competitive industry.'
      Sharma contends that ship recycling is actually a green industry, with some of the biggest benefits coming from the way parts and furnishings from ships are reused. There are huge numbers of businesses in places like Alang selling everything from silverware and refrigerators to recycled generators that have been removed from ships. He said entire hotels have been furnished with material from scrapped passenger ships.
      Ship owners get a better price for their vessels on the subcontinent than they do in other parts of the world, not just because of lower labor costs, but because the steel that comes out of a ship goes directly into rolling mills and not into a scrap foundry as it would in a western country, where it would be made into ingots or billets.
      'You skip the entire induction furnace process and it is more energy efficient,' he said.
      Prices paid for ships are well off their highs from last year, when they reached more than $750 per light displacement ton. In early March GMS's weekly market report said that breakers were paying anywhere from $210 to $280 per ton for general cargo ships and $230 to $330 per ton for tankers.
      Sharma explained that tankers command a better price than bulk carriers both because the quality of steel tends to be higher in tankers and because there is less steel wastage than on a bulk carrier, where metal may be corroded by cement, salt or fertilizers that were carried in their holds. Wastage might reach 7 percent in a bulk ship, he said, while in a tanker it might be only 2 percent or 3 percent.
      Ships fetch lower prices in China, but some owners prefer to scrap their vessels there because they feel the method that the Chinese use, where vessels are cutup alongside a dock, is safer for workers and more environmentally sound, because cranes can be used to help lift heavy parts as the ship is dismantled.
      A.P. Moller – Maersk demolishes vessels at the Changjiang Ship-Recycling Yard, located in Jiangyin, about 80 miles up the Yangze River from Shanghai, said Tom Peter Blankestijn, project leader for ship    recycling. In the past year and a half, the company has begun developing a consulting business and is now working with about a half-dozen other ship owners in helping them arrange plans for demolition of ships.
         Blankestijn's company has arranged the scrapping of about 27 ships, about three quarters of which have been Maersk or former P&O vessels. He said the facility is able to handle the largest ships and that his company has been working with owners of a wide variety of vessels including tankers, bulkers, car carriers and containerships.
      Jenssen believes more shipbreaking work could be done in an environmentally responsible way at former shipyards in Europe, as is planned in Hartlepool.
      Turkey is another shipbreaking center. Environmentalists claimed a major victory last year when the Otapan sailed to the shipbreaking yards of Aliaga, Turkey, near Izmir, but only after the ship was precleaned by having toxic materials, such as asbestos and PCBs, removed from the ship.
      Puckett said progress is also being made in Turkey where he said the beaches ships are pulled onto are not tidal.
      'We are trying to get them to make those ramps concrete-lined and have a collection system so they would be similar to what is done in Brownsville, Texas,' where the U.S. shipbreaking industry is concentrated.