Monday, 30 September 2013

Ship breaking: An untapped goldmine 

Ship breaking or ship demolition is a type of ship disposal involving the breaking up of ships for scrap recycling. Most ships have a lifespan of two to three decades before there is so much wear that refitting and repair become uneconomical.
Ship breaking allows materials from the ship, especially steel, to be recycled. Equipment on board the vessel can also be reused.
As an alternative to ship breaking, ships are also sunk to make artificial reefs after being cleaned up. Other possibilities are floating (or land-based) storage.
Until the late 20th century, ship breaking took place in port cities of industrialized countries such as the United Kingdom and the United States. Today, most ship breaking are carried out at the beaches of developing countries, with the largest beaching operations at Gadani in Pakistan, Alang in India, Chittagong in Bangladesh and Aliaga in Turkey. This is due to lower labor costs and less stringent environmental regulations dealing with the disposal of lead paint and other toxic substances.
The shipyards at Alang recycle approximately half of all ships salvaged around the world. The yards are located on the Gulf of Khambat. Large supertankers, car ferries, container ships, and a dwindling number of ocean liners are beached during high tide, and as the tide recedes, hundreds of manual laborers dismantle each ship, salvaging what they can and reducing the rest into scrap.

Gadani ship-breaking yard is the world's third largest ship breaking yard. The yard consists of 132 ship-breaking plots located across a 10 kilometre long beachfront at Gadani, Pakistan, about 50 kilometres northwest of Karachi.
In the 1980s, Gadani was the largest ship-breaking yard in the world, with more than 30,000 direct employees while about one million others also depend on the yard. However, competition from newer facilities in Alang, India and Chittagong, Bangladesh resulted in a significant reduction in output, with Gadani, today, producing less than one fifth of the scrap it produced in the 1980s.
Over 1 million tons of steel is scavenged per year at Gadani and much of it is sold domestically. In the 2009-2010 fiscal year, a record 107 ships, with a combined light displacement tonnage (LDT) of 852,022 tons, were broken at the yard whereas in the previous 2008-2009 fiscal year, 86 ships, with a combined LDT of 778,598 tons, were turned into scrap.
Some ship breakers still remain in the United States and they work primarily on government surplus vessels. There are also some in Dubai, United Arab Emirates for tankers. China used to be an important player in the 1990s. It is now trying to reposition itself in more environmentally friendly industries.
In addition to steel and other useful materials, however, ships (particularly older vessels) can contain many substances that are banned or considered dangerous in developed countries. Asbestos and polychlorinated biphenyls (PCBs) are typical examples. Asbestos was used heavily in ship construction until it was finally banned in most of the developed world in the mid 1980s. Currently, the costs associated with removing asbestos, along with the potentially expensive insurance and health risks, have meant that ship-breaking in most developed countries is no longer economically viable. Removing the metal for scrap can potentially cost more than the value of the scrap metal itself. In the developing world, however, shipyards can operate without the risk of personal injury lawsuits or workers' health claims.

Asian scrap yards generated $6.3 billion (about N977 billion) from beaching last year, according to shipping-industry data provider Lloyd's List.
European shipowners sent a record 365 vessels to South Asia's beaches last year. Turkey and China also recycle ships but they don't pay as well for scrap and their capacity is limited.
Yards in Turkey and China buy ships for scrapping at $300 to $340 a ton of steel, depending on the grade, compared with $410 in South Asia.
Some 300,000 people are dependent on the ship breaking industry in Bangladesh. Ships usually are sold to middlemen who then sell the vessels to ship breakers who can sell the scrap steel. South Asian ship breakers typically will recycle not only the steel, but the contents of a ship, for example its furniture and dinnerware, as well. Ship breaking is not without potential hazards though as many ship breaking yards in developing nations have lax or no environmental law, enabling large quantities of highly toxic materials to escape into the environment and causing serious health problems among ship breakers, the local population, and wildlife. Environmental campaign groups, such as Greenpeace, have made the issue a high priority for their activities.
The World Bank estimates that 79,000 tons of asbestos and 250,000 tons of other carcinogenic chemicals will be dumped on Bangladesh's beaches alone over the next 20 years.

Despite these potential hazards, business is booming for the iron eaters as the scrappers are called, and not just in Asia. The ongoing global shipping crisis has forced fleet owners to downsize as older ships become unprofitable. A record number of more than 1,000 ships were scrapped worldwide in 2012. India accounted for the largest number, 527, followed by Bangladesh, Pakistan and China. The expensive steel giants are sometimes taken out of circulation after only 15 years.
European ship owners prefer to dump their defunct ships in South Asia, where there are few environmental and occupational safety regulations, but where steel is all the more valuable. The high-quality steel used to make the vessels is in great demand as a resource. Recycling ships currently satisfies 9 percent of India's demand for steel.
Pots, beds, TV sets -- everything that crews of the scrapped ships once used on board -- are re-usable.
While we have a handful of ship breaking operations at Ilashe Beach in Lagos, this huge multi-billion dollar industry is largely untouched in Nigeria.
Investors should begin to look at taking advantage of this huge industry.
The health and environmental hazards associated with ship breaking at the beach should not be a deterrent to investing in the sector as fixed docks can be built in contrast to the controversial disassembly on the beach. The Federal Government also has a major role to play in encouraging the development of this industry.
Government will do well to institute measures including the declaration of a portion of our coastline as a ship-breaking yard, reduction in import duties on ships designated for breaking-up to encourage patronage and the creation of a dedicated department under the Ministry of Transport to regulate and address infrastructure and logistics issues. 

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