Bloomberg – Changing Flags to Use India’s Ship Graveyard

(Written by Anurag Kotoky)

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12 February 2015 - The container ship MV Justus, built in 1995 by Polish shipyard Gdynia Stocznia, spent most of its 19 years plying the seas with a European pedigree. It was first owned by a German ship fund run by Hamburg-based asset manager König & Cie. But like a growing number of aging vessels, the MV Justus changed its nationality only months before being taken out of service. In doing so, it avoided a late 2013 measure by the European Union that banned ships registered in its 28 member nations from using dangerous tidal beaches for ship demolition work.

On July 9, 2014, the ship changed its flag to that of the tiny Caribbean island nation of St. Kitts, according to data from NGO Shipbreaking Platform, a coalition of environmental, human rights, and labor rights organizations working toward safe and clean ship recycling. Then, after starting a journey from Las Palmas in the Canary Islands on July 15 and sailing through Port Said and Dubai, data compiled by Bloomberg show, it ended up on Aug. 17 near Bhavnagar, off the coast of the Indian state of Gujarat—defying a year-old restriction from the EU. On Aug. 28, now under an owner called Malwi Ship Breaking, according to Indian government data, the MV Justus docked at Alang, the ofttimes dangerous yard where the world’s ships go to die. True to form, about a month later a worker was killed when he fell from a high ladder while breaking up the vessel. Another was severely injured.

König & Cie. spokesman Detlef Seiler said via e-mail that the ship had declared insolvency. “The sale for scrap was entirely in the hand of the [insolvency] administrator and the financing bank,” he said, and König & Cie. wasn’t involved in the ship’s flag change. Calls to a number for Malwi went unanswered.

Alang’s 11-kilometer (6.8-mile) stretch of land has become the world’s largest yard for what’s known as shipbreaking, the dirty, deadly work of tearing apart massive vessels so that their steel and scrap can be sold or junked.

Despite the EU ban, European ships keep coming to Alang. Some change their registrations, or flags, to countries without such rules just before reaching Indian waters. “There are special kinds of flags” valid for a few months that don’t require an operator to set up shop in the issuing nation, says Patrizia Heidegger, executive director of Brussels-based Shipbreaking Platform, and “they are particularly cheap for a last voyage.”

Besides St. Kitts, the flags come from such places as Comoros, Nevis, and Tuvalu, Heidegger says. Although it could be used by shipowners to sidestep current EU regulations, the process of changing registration is not illegal. Vishwapati Trivedi, India’s shipping secretary, did not respond to interview requests. Nitin Kanakiya, the secretary of India’s Ship Recycling Industries Association, says many owners register their ships in such havens as the Bahamas, Liberia, and St. Vincent for their stricter privacy laws, not in attempts to escape safety rules. Jakub Adamowicz, a spokesman for transport at the EU, didn’t respond to an e-mail seeking comment.

In Alang, about 1,200 kilometers from New Delhi, barefoot workers manually break up ships, exposing themselves to toxins including asbestos and lead. As workers without protective gear toiled on one hulk recently, explosive gas cylinders scavenged from other dying vessels lay about nearby. “This is not shipbreaking, this is international hazardous waste trade,” says Gopal Krishna, founder of ToxicsWatch Alliance, a nonprofit activist group. “This is transfer of toxics from developed nations to a developing nation.”

In 2014 as many as 181 European ships were beached in Alang, says Shipbreaking Platform, which compiles the data from ship buyers, other nonprofits, and maritime databases. As many as 27 of them changed flags before entering Indian waters, it says. Ships entering India included oil and chemical tankers, according to Gujarat government data obtained by Bloomberg.

Fatal accidents are common in Alang. One morning last June, five workers were breaking up a chemical tanker when a blast near the ship’s engine room killed them. Two weeks later, Prime Minister Narendra Modi halved the tax on ships imported to be broken up, potentially boosting the $2 billion industry that left at least 21 workers dead in 2014.

More than 130 shipbreakers operate at Alang, monitored by 12 safety inspectors. The EU requires that shipbreakers use gear such as cranes and provide medical care for workers. But Indian companies say their safety standards are adequate. “We have our own safety mechanism in place, which is good enough,” says Kanakiya of India’s ship recycling association. “What the EU demands is completely unnecessary, and that will involve a lot of capital spending, which can make us economically unviable.”

The Federation of Ship Recycling Associations, a group of ship recyclers from Bangladesh, India, and Pakistan, will meet in Singapore in March to jointly oppose the EU ban, it said in a statement.

The bottom line: European Union ships are barred from using India’s Alang beach for ship demolition, but many sidestep the restrictions.