Scrapping shakeup

Scrapping of ships may enter a new era, as the workings in this market tend toward forcing shipowners to pay for the process themselves, instead of receiving money per ton of melted steel. The sector is getting added attention due to the compulsory withdrawal of the existing tanker fleet which is single-hulled or aged over 25 years. To date most of the world’s scrapping is concentrated in ports of Asia, such as Bangladesh, India and China, as they offer higher prices per ton of melted steel. For instance, a ship was recently sold to a Bangladeshi scrapyard for $430 per ton. Now this may be about to change, as Lloyd’s Register recently referred to a European Commission initiative to transfer the scrapping process to EU countries. A proposal tabled favors the obligatory withdrawal and scrapping in the EU, as Asian scrapyards do not adhere to the rules of security and environmental protection. Still, the adoption of this proposal is far from certain yet and it is not clear whether it concerns EU-based companies or EU-flag companies. If this goes ahead, shipowners will suffer significant losses due to the high difference in prices being offered by Asian and EU scrapyards. Lloyd’s Register experts suggest that the cost would reach $90 billion from the difference in rates alone. Yet other analysts point out that this may be be just meant to apply pressure on Asian governments to modernize their scrapping facilities and protect the environment. Tim Wilkins, the president of Intertanko (the international tanker owners association) said it is likely that in the near future shipowners will have to pay themselves for the scrapping of their vessels. The effects of scrapping on the environment increasingly concern the international shipping community: The International Maritime Organization and the International Labor Organization have started discussing the adoption of a binding set of rules on scrapping that are expected to increase significantly the cost of the process.

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