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Challenges facing ship recyclers in new and future locations

THE key role of ship recycling in decarbonising needs to be conveyed to a public that still frowns upon ship recycling. Much of the ship recycling sector itself is improving its practices by following safe and environmentally sound procedures.

The concept of green steel is gaining importance. Many newbuilding shipyards, large steel mills and big, responsible shipowners are now encouraging use of steel obtained from safe and environmentally sound ship recycling to source steel for further production instead using steel produced from iron ore.

We have seen new ship recycling facilities set up in Bahrain, Brazil, some EU nations, Indonesia and the UAE.

Wirana notes other countries in Africa, Asia and Latin America are considering establishing ship recycling facilities. While China has stopped accepting foreign-flagged ships for recycling, the government is encouraging steel scrap for steel manufacturing, a method to reduce the level of pollution caused by finished steel made from iron ore.

A lingering question is the sector’s future strength in South Asia which has been recycling 80%-85% of the global fleet, given the growing importance of the circular economy and new recycling facilities emerging globally.

Countries establishing new ship recycling need to have facilities for processing hazardous materials at reasonable costs, a skilled and trainable workforce at reasonable costs, transparent ship recycling regulations, free access to foreign exchange, a stable economic and political environment, and an effective legal system among other factors.

It is also important for ship recycling facilities in new countries to be able to access the market for recycled and reused products in proximity.

Common elements missing from burgeoning locations are adequate and comprehensive ship recycling regulations, absence of infrastructure to treat hazardous materials, and inadequate information about relevant government agencies that can resolve issues related to ship recycling.

Absent too is adequate market infrastructure to sell ships’ recyclable material such as steel plates, generators, cranes, engines, pipes and wood.

Training facilities for workers must also be established in proximity to recycling facilities so that it is less costly and time consuming to send workers for training. Easy and quick access to good hospitals is also an important element in establishing a recycling facility.

All these requirements are links in a chain, the strength of which can be compromised by any weak link.

If all the above challenges are met by government authorities and project owners, the remaining — and ultimate — challenge is to persuade shipowners to deliver vessels for recycling at prices lower than those offered by South Asian and Turkish yards.

EU-listed ship recyclers in Europe, UK and US fully understand that price is the main reason they are not receiving their desired global share of vessels for recycling.

Türkiye stands to benefit because within OECD countries, ship recyclers in Türkiye offer higher prices than their counterparts in other OECD countries. In South Asia, Bangladesh and Pakistan are preferred ship recycling destinations because HKC (Hong Kong Convention) compliant ship recyclers in India cannot match prices offered by their regional counterparts (all other market factors being equal).

Wirana summarises by saying that new, upcoming ship recycling facilities will only survive either due to the advantage of offering geographical proximity for certain types of vessels and/or their ability to partner up with prominent players. The ultimate key to survival after getting adequate government support as well as adequate infrastructure is ability to source the end-of-life vessels at right price.

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