RECYCLING

SURGE IN

SCRAPPING

Despite facing many challenges during the pandemic, ship recycling is showing a healthy growth. However, the industry still has many issues to face

Recycling activity continued in the first half of the year with 275 cargo vessels sold for scrap, up 40% and 33% compared to 2020 and 2019, respectively, according to information from VesselsValue — although incentivising operators remains an issue The vessels totalled 11.9m dwt with a total scrap value of more than $1bn. 131 tankers were scrapped, accounting for nearly half of all cargo vessels scrapped in H1 2021.

The increasing scrapping numbers are a direct result of exceptionally high scrapping rates, which rose and continue to rise throughout 2021, according to the company. The surge in scrapping prices is partly the result of increased steel prices and higher demand, in which the pandemic had a part to play. High earnings for the bulker and container segments meant that many owners preferred to keep ships operating rather than scrapping them, although tanker owners were more likely to take advantage of high scrapping prices, says the report.

The number of tankers scrapped in the first half of 2021 rose four-fold compared to 2020 and 2019. The total number of tankers scrapped throughout 2020 and 2019 was 92 and 91 respectively.

Despite the high scrap prices, high earnings prevented many bulker owners from scrapping tonnage during the first half. Scrapping numbers have remained comparatively low for the first half 2021, down 13% from the same period in 2020.

Container scrapping numbers are down 78% from 2020 as the sector benefitted from high earnings. Some seven out of the 10 containerships scrapped this year were small feedermaxes, all 25 years or older.

As to the principal yards used, all were affected by issues such as covid-19 cases, yard lockdowns and lack of oxygen supply. During April, Bangladesh, India and Pakistan suffered due to rising covid-19 cases. India was particularly impacted as it saw another set of lockdown restrictions imposed.

Notwithstanding the pandemic, scrapping prices and numbers continued to rise. Bangladesh took the lion’s share in the first half of 2021, scrapping 106 vessels, up 80% from the previous year’s figures. India and Pakistan scrapped 53 and 51 vessels respectively, down from the latter half of 2020.

The mobile offshore drilling market was also feeling the pain with a number of operators having to go through Chapter 11, some of them for the second time in five years.

Much will depend on the attractiveness of keeping ships trading during the second half, against the need to comply with new environmental regulations, an aging fleet and the lure of high scrap prices.

Also, going forward there will need to be consideration given to whether, as the industry seeks to decarbonise, whether the methods used to dispose of ships do themselves meet green requirements.

Yards have often come under the spotlight in terms of their policies with regard to scrapping, not least in dealing with the re-cycling of ecounfriendly materials. Ship breaking can negatively impact the local environment and workers in yards often have to carry out the task in hazardous conditions.

With disposal of vessels attracting greater attention from the authorities, owners and operators may face legal action going forward if they are found to be at fault in selling on a ship at the end of its life to a ship breaker who does not dispose of it correctly. This should encourage operators to go for greener ship options and many may avoid this approach while existing tonnage that does not tick the environmental boxes is still available for use.

Operators are being advised to carry out due diligence on yards ahead of deciding to dispose of their ships and regulators are likely to look back at the paper trail when deciding whether to bring proceedings against different players in the chain leading to the disposal of a vessel. Regulators will be looking back at the process to ensure a breach of procedures have not occurred at any stage. STRIKE ACTION

Activities at the Alang ship recycling yard in Bhavnagar district, Gujarat, India, have been affected by strikes in recent weeks, with transporters working with ship breakers taking industrial action over loading and transport charges.

Commenting on the situation Ramesh Mendpara, vice-president of Alang Ship Recycling Association, says: “We have been forced to shut all ship recycling-related activities over the past fortnight due to the transporters’ strike. There are no takers for scrap. Ship recycling units are unable to fulfil pending orders of steel and other material extracted from broken ships.”

In the wake of increasing fuel prices, transporters demanded a hike in transport charges by at least 10%. They also demanded that loading charges of Rs 100 per tonne, which are borne by transporters, be waived.

More than 50% of scrap is purchased by nearly 100 re-rolling mills in Sihor town, around 65km from the Alang yard. Traditionally, transport charges are borne by scrap purchasers. Hence, ship breakers have involved officebearers of re-rolling mill associations to sort out the issues with transporters.

Gujarat ship recycling has been going through many challenges due to the pandemic, with closures of recycling units, partly due to a shortage of oxygen, which is used to cut heavy metals during the shipbuilding process. There has also been shortage of workers due to the pandemic. More than 15,000 workers are employed at Alang directly and more than 50,000 are getting indirect employment in post-ship recycling activities. RECYCLING TRANSPARENCY

Crowley Maritime Corporation recently joined the team of shipowners and operators who have been disclosing ship recycling policies, practices and process through the Ship Recycling Transparency Initiative (SRTI).

Headquartered in Florida and operating more than 160 commercial and public-sector vessels globally, including container ships, tank vessels, tugboats and barges, Crowley becomes the first U.S.-owned and operated shipping company to make its approach to ship recycling public through the SRTI.

“Crowley’s ambition is to be the most sustainable and innovative maritime and logistics solutions provider in the Americas by 2025. Making that vision a reality requires us as ship operators to embrace the sustainability of the total life cycle of a vessel,” said Crowley’s Nico De Golia, Director of Global Sustainability and Corporate Citizenship. “We are proud to join the SRTI in promoting transparency in ship recycling policies, practice and processes to promote more responsible life-cycle management of vessels.”

“Ship recycling is a material issue for all shipowners – whether they own a vessel at the beginning or end of life, and regardless of geography, size, or type of vessel. Ensuring responsible, transparent recycling is a shared responsibility for the industry, and we are glad to welcome Crowley Maritime Corporation, which brings a unique perspective as a shipowner with a largely U.S.Jones Act compliant fleet,” said Andrew Stephens, Executive Director of the SRTI. “We look forward to working with Crowley and other signatories to enable ship recycling transparency everywhere.”

Crowley joins industry peers in disclosing data against five topics: ship recycling policies and standards; selling owned vessels for further trading; ship recycling contracts; ship recycling documentation; and policy and standard implementation. For more information about the data disclosed by shipowners, read the SRTI’s recent progressreport.