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October 21st, 2010 Ship Recycling: Trends, Developments & Outlook 1

Ship Recycling – Trends, Developments & Outlook

Ship-Recycling: From 2004 – late 2008

Slowest periods in history of ship recycling More than 5-fold increase in demo prices

(from USD 150/LT to USD 800/LT– Profit taking: Demo ship values exceeded old

trading values (ships bought at USD 2 mill were being sold for USD 4 million)

Dry bulk vessels disappeared from the market (ships destined for scrap went for trading)

Cargoes available for scrap vessels Ship recycling capacity shrank

Ship Recycling: Trends, Developments & OutlookOctober 21st 2010 2

Ship-Recycling: What happened after 4th qtr of 2008

Collapse of ship and scrap steel prices by about 75%

Credit Crunch: – Local banks withdrew credit lines causing abrupt

halt in local Letters of Credit (LCs)

– Western banks unable to negotiate LCs

Relentless supply of ships – mainly dry bulk {capers, panamax, handymax (125 in 6months)}

More renegotiations than ever before.

More lawsuits, auctions, arrests


Ship-Recycling Today: Volumes

Pre-3rd quarter 2008: about 300 ships/year Post 2010:

– expected to be record years… 900-1,000 ships? – USD 2 billion annual turnover

Location:– Indian Subcontinent (Bangladesh, India,

Pakistan) will do about 75% of the business (down from about 90%)

– China has come back strong– Turkey: Beneficiary of high Suez transit costs,

piracy and low prices in the Indian subcontinent


Impact of strong supply on ship-recycling capacity

– Do we have enough ship recycling capacity in the world to meet the onslaught of high volumes? India: 180; Bangladesh: 40; Pakistan: 30; China

and Turkey: 20-25.

– Is capacity elastic or unelastic? Can we recycle more ships per yard? Can we “build” more yards in current ship

recycling countries?

– What if the world runs out of ship recycling capacity?


Factors affecting PRICES

Supply vs Demand

Vessel specific– Type, where built, LDT

– Condition/Cargoes/Ownership

– Spares, Machinery, goodies

Local Fundamentals– Steel prices and demand

– Exchange rate

– Market expectations (supply, budget, etc)

Overall capacity and competitive forces


Example: Disposing a Car

30-years old car for disposal

USA price: USD 300

India price: USD 3000

Where do you sell? Why?

If India, How? To Whom? Regulations? Guarantees? Safety of monies?

Questions, Questions and More Questions…. Cash Buyers find the answers


Road Ahead

Safe & Responsible Ship Recycling

– Worker Safety + Green Ship Recycling

– Adoption of IMO Convention and implications

– GMS + GL Will provide a strong foundation for sustainable shipping

– Aged ships will be assets and not liability


IMO Convention

What is the CONVENTION?– Most comprehensive & consequential

– Key items: Inventory of Hazardous Materials

Ship Recycling Plan: Identification, Removal and Safe Disposal of Hazardous Materials

Worker Safety at Yards


IMO CONVENTION –Opportunities and Threats

Opportunities– Convergence of interests

IGOs, NGOs (not all), Owners, Buyers, Ship Recyclers, Class societies

– Funds & Programs World Bank, ILO, Basel, Owners’ Assoc

Threats– Participation (lack of)

Government, industry players, Handy owners

– Misrepresentation & Accountability Beaching Method


Myth: Green ≠ India?

Myth: Bare Hands Fact: PPE


Myth Vs. Fact

Myth: “Half-naked” workers!

Fact: Fully covered workers in PPC


Myth Vs. Fact

Myth: Open Fires Fact:


Myth Vs. Fact

Myth: Unlicensed and uncertified industry!

Fact: ISO 9001, 14001 & OHSAS 18001 cert.


Ship-Recycling: India

Poor Image – Renegotiations

– Worker Rights and environmental concerns

Heavily regulated– More than 20 licensing bodies

– 55 ISO 14001/9001 and OHSAS 18001 certified yards (several with all 3)

Safety record– lowest accident rate of any major industry

Economic Benefits– Better than other labor intensive industries


Why India?

Provides good combination of asset value + green ship recycling

GMS & GL tie up. Best value for Responsible Owners.

IMO has acknowledged India’s improved standards

Blue-chip owners have accepted India’s Green credentials

India’s high prices are because of REUSE and better prices for recyclable items rather than cheap labor


REUSE - Better than Recycling

Infrastructural growth – Ship steel vs. Iron Ore

Machinery & Parts– Agricultural & Industrial

– Spare Parts

– Furniture, fixtures, Oils etc.

– Defined Re-use Market for every nut and bolt, thus industry is truly Recycling Industry.


Closing Thought

A healthy, vibrant ship recycling industry,

– Is good for the environment

– For the shipping industry

Outlet for safe disposal of old vessels

Increase in Residual values

– Creates employment for about 300,000 people

– Essential for growth of local economies


Finally

This is the time for all stakeholders to come together. Otherwise, an asset-based industry will turn in

to a liability, which must be avoided to ensure sustainability

of shipping industry.


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