Global ship breaking industry set for resurgence

CHITTAGONG , BANGLADESH (Scrap Monster): The prominent centers of the ship breaking and recycling industry is located in India, and Pakistan, China and Bangladesh. These three countries account for majority of the international ship breaking of ocean-going vessels and control more than 90% of the market.

Steel scrap from the demolished ships is a major source of raw material for the re-rolling mills in India. Nearly 70 % of the total light displacement tonnage of a ship broken constitutes of re-rollable scrap. This is due to high quality of steel that comes in the form of re-rollable scrap from ships. The steel used to manufacture ships can withstand pressure and strain on account of severe cold. These features if translated into manufacture of bars and rods give similar qualities of steel with equal strength.

Bangladesh, the top ship recycling nation from 2004 through 2008 faced a ban on ship-breaking on due to its hazardous impact on environment and workers. The court's decision to lift the ban has triggered fears among the activists but it has come as a relief for the workers of ship breaking industry who had to face severe financial difficulties due to it.

If Bangladesh quickly increases its capacity, shipowners could scrap world's capacity of nearly 38 million dead weight tonne, a level not witnessed in decades and the ship breaking industry will play a significant economic role.

The supply of vessels for scrapping from the shipping sector is subject to large variations as a consequence of the global demand for shipping industry. Between 2004 and 2008 shipping saw unsurpassed freight rates as a result of high demand for maritime transportation. That high demand kept even older ships in operation during that period.

However, Freight rates have fallen to two-year lows this year as the expansion of the global fleet far outstripped demand. Bulk buying of ships before the economic downturn two years ago are now arriving from the shipyards. The oversupply problem, coupled with high prices of steel and bunker fuel, have made scrapping vessels an attractive financial alternative.

As per industry experts, maritime firms are expected to scrap more than 30 million deadweight tonnes this year, surpassing previous two years figures. The future demand for scrapping  is not expected to fall in near future. This is due to the generation of a massive construction in the shipbuilding yards during previous boom years. Thus tonnage is expected to be in excess of demand for at least 5-10 years to come.

Ship recycling conserves resources, employs an unskilled workforce, and removes outdated tonnage. Operating mainly on the Indian subcontinent, this ‘primitive’ industry often results in loss of human life and pollution of the marine environment. The government and governmental agencies need to take necessary steps to address the environmental impacts of this industry.