China Daily Asia – Scrap value

Written by Chitralekha Basu

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3 November 2015 - In September, two ship recycling facilities in Alang, on the west coast of India, were awarded certificates by ClassNK, one of the world’s leading classification societies dedicated to the safekeeping of the marine environment. It was a landmark event. This was the first time the standards at any recycling facility in South Asia had received the stamp of approval from a global watchdog, monitoring marine safety. In the popular imagination the ship scrap yards in Alang — the subject of dystopian documentaries and the setting of Max Brooks’ zombie apocalypse novel World War Z — are commonly associated with some of the world’s most hazardous, and horrifying, work environments. So getting a thumbs-up from a reputed, world-class, invigilator of marine pollution was no mean achievement.

There is a Hong Kong connection here. The Statements of Compliance (SoC) issued by ClassNK, certifying that the facilities in Alang have passed muster, are benchmarked against the Hong Kong International Convention for the Safe and Environmentally Sound Recycling of Ships, drafted in 2009. Although the Hong Kong Convention is yet to become enforceable — and it is doubtful if it ever will, with only three countries (Norway, France and Congo) ratifying it so far, as against a minimum of 15 required to make it statutory — its significance becomes increasingly apparent. When Tokyo-based ClassNK uses a set of regulations drafted in Hong Kong as a template to validate the safety standards practiced in the scrap yards of India, it’s evident that the battle for safe recycling of marine vessels transcends national and even regional boundaries.

A lost world

The dredging up of the Hong Kong Convention 2009 to mandate Alang’s scrap yards also points to a chapter in Hong Kong’s maritime history that’s all but forgotten. There was a time when end-of-life ships from the world over would wash up on the shores of Hong Kong. On the Industrial History of Hong Kong website, Hugh Farmer refers to the March 1961 edition of the Journal of the Geographical, Geological & Archaeological Society, which indicates “ship-breaking in Hong Kong goes back to at least 1861 when the Bombay (now Mumbai) built Minden was sold for demolition here”. “In 1961 there were 23 ship-breaking companies registered with the Marine Department, representing a total investment of HK$100 million and employing over 4,000 people,” he quotes. “By 1959 Hong Kong had the largest ship-breaking industry of any port worldwide and ships were being brought here faster than they could be dealt with.”

A Marine Department journal, The Port of Hong Kong, published in 1966, corroborates the idea that Hong Kong might indeed have been the world leader in ship scrapping at the time, especially in the first flush of large-scale construction of affordable public housing. “Ship-breaking is an important industry in Hong Kong, because the market for scrap is geared to the building industry, where the demand for mild steel bars may be as high as 16,700 tons a month. To meet this demand as many as 30 vessels, each averaging 7,000 gross tons, may be in process of demolition at any one time. In addition, there is a demand in Southeast Asian countries for mild steel rods and bars, and this is met, in part, by Hong Kong.”

The once thriving ship scrapping industry in Hong Kong seems to have sunk without a trace. The scrap yards in Cheung Sha Wan, Ngau Tau Kok, Gin Drinkers Bay, Kwun Tong and Tsuen Wan — where laborers routinely exposed themselves to old fuel oil, asbestos and toxic oil paint — have all but vanished. The last of these, at Junk Bay (Tseung Kwan O), became inoperative in the late 1970s.

Ship scrapping in Hong Kong has gone for 35 years and nobody mourns its loss. It seems to have been a marginalized activity, even while it supposedly was booming. Even a self-proclaimed “dockyard kid”, like the poet David McKirdy, who grew up playing hide-and-seek between the moored ships at Whampoa in the 1960s, had only vaguely heard about ships lined up on the shore at Junk Bay, awaiting their turn to be dismantled. Not only are Hong Kong’s once bustling ship scrapping yards relegated to a footnote in history, there is no effort to memorialize their past. As Stephen Davies, former director of the Hong Kong Maritime Museum, says, “If you’re looking for relics of ship scrap, the spine of that ship (which would normally remain intact, even as the rest was chopped to pieces) is 4 meters under reclamation.”

Davies has watched keenly the rise and fall of the city’s ship scrapping enterprises. He remembers stumbling on to the remains of the ship on which he arrived in Hong Kong from Britain in 1947 — the RMS Strathnaver — dismantled on the shores of Ngau Tau Kok, in a photograph. Ironically enough, scrap yards had to make way for buildable land in the wake of the housing boom — the very houses that were being fortified with reinforcement bars rolled out of ship scrap.

“Hong Kong was running out of places to break ships that were also close to the steel re-processing units, which in their turn, were under pressure because of rising land values and rents and (if slowly) growing awareness of the need to zone industries, especially those potentially polluting,” says Davies. “The rapid growth of light industries also inspired a lot of workers to move on to do less hazardous jobs. They started working in construction.”

In the absence of a government initiative to subsidize the operation, “Hong Kong was structurally and in policy terms ill-placed, to profit. The work went mainly to Taiwan, which was the main player in the huge 1980s scrapping boom,” Davies adds.

2009 HK Convention

In 2009, when the United Nations International Maritime Organization held its Convention on Ship Recycling in the city, Hong Kong was back on the global ship scrapping map, except it didn’t have a direct stake in it any more. By then Hong Kong ship-owners had been sending their rust buckets to be broken down on the shores of India, Bangladesh or the Chinese mainland for at least 30 years. But did that absolve them of their role in the supply chain or for that matter their responsibility towards preventing marine pollution by adhering to acceptable standards of safe ship recycling?

Alan Loynd, managing director of Branscombe Marine Consultants Ltd, says Hong Kong-based shipping companies are an environmentally-concerned lot, to start with. “Very few owners in Hong Kong would keep a vessel until it reached the stage where it should be sent for scrapping,” he says.

An environmentally sensitive company, like Swire, he points out, is already following regulations set by the Hong Kong Convention. Each new ship the company builds comes with an inventory of hazardous materials, passed by reputed classification societies such as Lloyd’s Register or Bureau Veritas, certifying they are meeting environmentally acceptable standards.

Christine Bossard, spokesperson for Robin des Bois, a Paris-based non-profit intervention group against environmental crimes, however, is not willing to give Hong Kong-based ship-owners a clean chit just yet. “They usually send their ships where they are offered more money,” she says. “In the second quarter of 2015 for instance, 40 percent of the ships owned by a Hong Kong-based company have been demolished in the Chinese mainland compared to 60 percent in Bangladesh, India and Pakistan. At the time, a ship sent for recycling would fetch $380-420 per ton on the subcontinent as against $200 on the Chinese mainland.”

Scrap yards that offer more money for buying junk are understood to be compensating themselves, by flouting environmental and labor protection laws — using cheap manual labor, instead of investing in cranes and electric saws, for instance. The cost-effectiveness of the regulations proposed in the 2009 Hong Kong Convention, especially in developing economies, have been brought into question. Although scrap yards in Alang have set an example by earning their Statements of Compliance, it is doubtful if many of their neighbors will follow suit.

“Breaking up ships is bloody expensive if you are going to be super squeaky-clean,” says Davies. “At the time of a big economic downturn, anyone running a shipping company, if they actually marked their ships to market operation, may become technically insolvent. So if you try to abide by the rules of the Hong Kong Convention, scrapping becomes a tough option to choose and, worse, the scrap yards themselves are then in difficulty and at risk of folding up and the poor man in Bangladesh is out of work. This is a classic case of a development economics dilemma.”

Loynd, however, is hopeful that, increasingly, ship-owners the world over will come round and appreciate the value of safe recycling, if they are serious about staying in business. “Forward-looking companies are already using the regulations in the Hong Kong convention as a blueprint,” he says. “Scrapping will increase and will be done in a much more sensitive way in the future. Everything about shipping is changing. It is evident in the introduction of LPG and hybrid electric power. On the flipside these changes will double the costs of running a scrap yard, but that’s the trade-off with the environmentalists.”

Although the Hong Kong Convention “applies only to signatory parties”, making it “very easy for an unscrupulous ship-owner to circumvent the regulation”, Bossard is not oblivious to its merits. “It was a first step to regulate ship-breaking activities and go beyond the ambiguity of status, applying to ships to be broken up,” she says. Prior to the Convention most ship-owners would refuse to consider ship scrap as waste. “According to the Convention, ship recycling has to include proper waste management.”

“The Hong Kong Convention is a progression because it has raised the issue of ship-breaking and the necessity of a global answer. Today ship-breaking yards in Europe, Turkey, the Chinese mainland and India already are claiming to be Hong Kong Convention compatible, and in some cases certified as such, by classification societies,” adds Bossard.

The Convention is also significant in that it might help “minimize sanitary and environmental risks in the way it sets standards upstream for new ships”. In ships of the future, “hazardous materials should be banned or less used and be subject to an updated inventory,” she reminds us.

And when the new-age green ships are finally out, testing the waters, Hong Kong people can tell themselves this is where their journey had begun.