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October 21st, 2010 Ship Recycling: Trends, Developments & Outlook 1
Ship Recycling – Trends, Developments & Outlook
Ship-Recycling: From 2004 – late 2008
Slowest periods in history of ship recycling More than 5-fold increase in demo prices
(from USD 150/LT to USD 800/LT– Profit taking: Demo ship values exceeded old
trading values (ships bought at USD 2 mill were being sold for USD 4 million)
Dry bulk vessels disappeared from the market (ships destined for scrap went for trading)
Cargoes available for scrap vessels Ship recycling capacity shrank
Ship Recycling: Trends, Developments & OutlookOctober 21st 2010 2
Ship-Recycling: What happened after 4th qtr of 2008
Collapse of ship and scrap steel prices by about 75%
Credit Crunch: – Local banks withdrew credit lines causing abrupt
halt in local Letters of Credit (LCs)
– Western banks unable to negotiate LCs
Relentless supply of ships – mainly dry bulk {capers, panamax, handymax (125 in 6months)}
More renegotiations than ever before.
More lawsuits, auctions, arrests
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Ship-Recycling Today: Volumes
Pre-3rd quarter 2008: about 300 ships/year Post 2010:
– expected to be record years… 900-1,000 ships? – USD 2 billion annual turnover
Location:– Indian Subcontinent (Bangladesh, India,
Pakistan) will do about 75% of the business (down from about 90%)
– China has come back strong– Turkey: Beneficiary of high Suez transit costs,
piracy and low prices in the Indian subcontinent
Ship Recycling: Trends, Developments & OutlookOctober 21st 2010 4
Impact of strong supply on ship-recycling capacity
– Do we have enough ship recycling capacity in the world to meet the onslaught of high volumes? India: 180; Bangladesh: 40; Pakistan: 30; China
and Turkey: 20-25.
– Is capacity elastic or unelastic? Can we recycle more ships per yard? Can we “build” more yards in current ship
recycling countries?
– What if the world runs out of ship recycling capacity?
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Factors affecting PRICES
Supply vs Demand
Vessel specific– Type, where built, LDT
– Condition/Cargoes/Ownership
– Spares, Machinery, goodies
Local Fundamentals– Steel prices and demand
– Exchange rate
– Market expectations (supply, budget, etc)
Overall capacity and competitive forces
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Example: Disposing a Car
30-years old car for disposal
USA price: USD 300
India price: USD 3000
Where do you sell? Why?
If India, How? To Whom? Regulations? Guarantees? Safety of monies?
Questions, Questions and More Questions…. Cash Buyers find the answers
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Road Ahead
Safe & Responsible Ship Recycling
– Worker Safety + Green Ship Recycling
– Adoption of IMO Convention and implications
– GMS + GL Will provide a strong foundation for sustainable shipping
– Aged ships will be assets and not liability
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IMO Convention
What is the CONVENTION?– Most comprehensive & consequential
– Key items: Inventory of Hazardous Materials
Ship Recycling Plan: Identification, Removal and Safe Disposal of Hazardous Materials
Worker Safety at Yards
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IMO CONVENTION –Opportunities and Threats
Opportunities– Convergence of interests
IGOs, NGOs (not all), Owners, Buyers, Ship Recyclers, Class societies
– Funds & Programs World Bank, ILO, Basel, Owners’ Assoc
Threats– Participation (lack of)
Government, industry players, Handy owners
– Misrepresentation & Accountability Beaching Method
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Myth: Green ≠ India?
Myth: Bare Hands Fact: PPE
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Myth Vs. Fact
Myth: “Half-naked” workers!
Fact: Fully covered workers in PPC
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Myth Vs. Fact
Myth: Open Fires Fact:
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Myth Vs. Fact
Myth: Unlicensed and uncertified industry!
Fact: ISO 9001, 14001 & OHSAS 18001 cert.
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Ship-Recycling: India
Poor Image – Renegotiations
– Worker Rights and environmental concerns
Heavily regulated– More than 20 licensing bodies
– 55 ISO 14001/9001 and OHSAS 18001 certified yards (several with all 3)
Safety record– lowest accident rate of any major industry
Economic Benefits– Better than other labor intensive industries
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Why India?
Provides good combination of asset value + green ship recycling
GMS & GL tie up. Best value for Responsible Owners.
IMO has acknowledged India’s improved standards
Blue-chip owners have accepted India’s Green credentials
India’s high prices are because of REUSE and better prices for recyclable items rather than cheap labor
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REUSE - Better than Recycling
Infrastructural growth – Ship steel vs. Iron Ore
Machinery & Parts– Agricultural & Industrial
– Spare Parts
– Furniture, fixtures, Oils etc.
– Defined Re-use Market for every nut and bolt, thus industry is truly Recycling Industry.
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Closing Thought
A healthy, vibrant ship recycling industry,
– Is good for the environment
– For the shipping industry
Outlet for safe disposal of old vessels
Increase in Residual values
– Creates employment for about 300,000 people
– Essential for growth of local economies
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Finally
This is the time for all stakeholders to come together. Otherwise, an asset-based industry will turn in
to a liability, which must be avoided to ensure sustainability
of shipping industry.
Ship Recycling: Trends, Developments & OutlookOctober 21st 2010 19