21 August 2014 - Last month, the final voyage of the “COSTA CONCORDIA” brought the shipbreaking industry into the spotlight. With international attention increasingly on ship recycling, August’s Shipbuilding Focus takes a look at where ships are demolished globally.
A Look Through the Scrapbook
The Graph of the Month shows demolition activity over the last decade. Scrap volumes were relatively weak during the shipping market boom with an average of 6.1m dwt reported recycled p.a. 2005-07. However, the global recession contributed to an upturn in demolition volumes and a record 58.4m dwt was reported recycled in 2012. Whilst global scrap volumes have subsequently fallen, demolition levels remain strong and 47.1m dwt was recycled last year. In the first seven months of 2014, 21.6m dwt has been reported scrapped – close to the long-term average of 24.9m dwt demolished per annum 1996-2013.
A Commonwealth Game
The majority of vessels are demolished by shipbreakers in the Indian Sub-Continent (ISC) and scrap yards in India, Bangladesh, and Pakistan have scrapped over 70% of tonnage in the ytd. In recent years Indian breakers have typically demolished the largest proportion of units and took 30% of global scrap volumes 2010-13. Currency volatility and political instability saw Indian breakers’ share of demolition fall to 25% last year, but their share is up at 33% in the ytd. Bangladeshi scrap yards accounted for almost 60% of demolition volumes 2005-08 in dwt terms but environmental disputes and competition have limited activity and they account for 18% of global scrap volumes in the ytd. Pakistani breakers meanwhile have taken an increasing share of global demolition, rising from an average of 5% in 2005-8 to 20% in 2013. In the ytd they are reported to have scrapped 4.6m dwt.
Just Off The Podium
Chinese scrap facilities have generally been less able to compete on price with breakers in the ISC due to the higher labour and yard costs compared to beaching. On average, Chinese breakers scrapped 8% of tonnage 2005-08. However, a narrowing of the scrap price differential between the Far East and ISC has helped increase their share of demolition volumes to an average of 21% in 2009-13 and last year their share rose to 24% (11.2m dwt). The government’s scrap subsidy has encouraged Chinese owners to recycle older ships domestically and over 90% of the 4.4m dwt reported scrapped in China in the ytd was Chinese owned. Elsewhere, though Turkish breakers’ share of global recycling is relatively small they have seen scrap levels grow from a reported 0.1m dwt in 2005 to a record 1.5m dwt in 2013. With a number of ‘green’ approved ship recycling yards located in Turkey, the growing focus of regulation on the safe and environmentally sound recycling of ships may prove a boost.
Whilst scrapping is down 26% y-o-y in the ytd, 2014 is still projected to see a firm level of demolition. The ISC scraps the majority of ships and India breakers currently take the largest share. Globally, Chinese breakers are increasingly prominent and regulatory pressure may see scrap volumes at Turkish recycling yards grow. Shipbreaking is a dynamic industry and the World Shipyard Monitor will continue to follow these key trends.