With scrap prices more than doubling in 2021 and the year closing out above a remarkable USD 600/ldt, questions are now being asked about how long into 2022 the resurgence can last.
Following a collapse in rates brought on by the Coronavirus outbreak, the price trajectory has been only up - mirroring dry and container charter rates and stock markets.
Inevitably, what goes up must come down, and as 2021 ends, we are starting to see a correction in ship recycling levels which is likely to continue into the new year.
Ongoing uncertainty surrounding about new COVID-19 variants remains a constant threat with disruption to trade and supply routes an ever-present danger. Is it any wonder that leading players are exercising caution, despite the outlook for prices remaining optimistic and vessel supply expected to remain somewhat static?
Most vessels recycled so far this year are from the beleaguered tanker and offshore sectors, and whilst charter rates remain in the doldrums, we expect it may be more of the same again for 2022. There are suggestions in the market that the wet market may be starting to turn a corner and there is some optimism for a resurgence in rates for the coming year. Hence it may be that we see tanker owners hold back their vessels for a while longer and wait for an uptick rather than opt to recycle now. This will lead to an interesting supply/demand dynamic playing out across the sub-continent, with a healthy appetite to fill plots in all locations apparent off the back of firm steel prices.
China demand for steel will also sustain in 2022, and rather than the cheap billets being exported from China in 2015 which so damaged the industry and led to a ship recycling recession, this is helping to prop up prices. The Chinese ship recycling market also remains closed, except for Chinese flagged government tonnage, so the majority of vessels are being recycled in the subcontinent and Turkey (for mostly EU flagged vessels).
Dramatic currency fluctuations have been of chief concern in both Turkey and Pakistan this year counteracting stunning steel gains seen on occasion in those locations and will likely continue to frustrate going into the New Year. In India and Bangladesh currencies have largely been stable, and this has contributed to the stunning performance of both markets this year in tandem with rising steel prices.
There has also been great progress in the upgrade/certification of yards in India, with 92 out of 120 active yards now holding either IR, LR, RINA or Class NK Statement of Compliance (SoC) with the Hong Kong Convention. In Bangladesh, so far, only PHP Ship Breaking and Recycling Industries holds a Class NK SoC, but several others are expected to follow suit as ship recycling standards continue to improve at pace.
So, whilst no one expects the market to double again next year, there is cause for optimism in 2022 global ship recycling markets, with demand rampant, a dwindling supply of vessels and strong local fundamentals expected to sustain across the board.
Senior Trader, GMS Singapore
December 13, 2021: GMS, the world’s largest buyer of Ship, Rigs and Offshore assets for recycling, has announced the appointment of Jon Chaplin in the role of Chief Communications Officer, commencing in the New Year, 2022.
GMS Founder & CEO Dr. Anil Sharma said: “I have known Jon for over a decade and have admired his authenticity and deep commitment to excellence in whatever he does. The ship recycling industry is an integral part of the circular economy, and Jon has many years of experience in media and this industry. He has spoken and written about his first-hand experiences by visiting yards to collect facts and discussing issues that impact us all. Therefore, he will be a valuable conduit between the several external stakeholders viz shipowners, capital providers, regulators, auditors, class societies, etc. and the ship recycling yards. I am excited to welcome Jon onboard.”
Having established the Ship Recycling Forum in 2009 while a director at TradeWinds, Chaplin formalized his hazmat expert training at GSR Services, later moving to Testing and Inspection specialist Lucion Marine where he helped clients achieve Inventory of Hazardous Materials (IHM) Certification and recycle their ships according to the Hong Kong Convention.
Speaking about the new role, Chaplin points to the rapidly changing landscape for marine and offshore recycling. “An important shift in attitudes towards ship recycling is taking place, both at the waterfront and now in shipping board rooms. Dr. Anil Sharma and his highly capable team are at the forefront of these positive developments, supporting yard improvements and helping owners meet increasingly stringent ESG requirements.”
Chaplin is candid about the challenges ahead and stresses the importance of maintaining momentum. “The pace of change is set to quicken in the next few years, both on the regulatory landscape and with decarbonization targets pushing owners to recycle uneconomic vessels. It is an exciting time to be involved in recycling and offshore decommissioning, with much at stake.”
Referring to the GMS Sustainable Ship and Offshore Recycling Program (SSORP), Chaplin commented, “GMS works very closely with like-minded ship owners and offshore clients to help them deliver responsible recycling solutions without destroying asset value. I’m looking forward to communicating the benefits and helping to take the business forward.”
December 3rd, 2021: We are delighted to announce that Dr. Anil Sharma, Founder & CEO of GMS, has been listed in the annual Lloyd's List Top 100 Most Influential People in the Shipping Industry for the twelfth year in a row. He joins a select group of shipping professionals and global leaders who have received this honor from the world's most prominent and respected maritime publication. GMS is the only institution from the ship recycling industry that has been nominated to this globally respected list.
In this year's ranking, Lloyd's List quoted that Dr. Sharma has spearheaded several key initiatives aimed at making ship recycling cleaner, greener, and more sustainable over the years. As complemented by Lloyd's List – "With nerves of steel and an abundance of patience, Dr. Sharma continues to reduce the shipping industry's global footprint by upgrading ship recycling safety standards, mitigating risk incidents and improving the workplace environment."
Dr. Anil Sharma commented: "I would like to express my sincere thanks to the editorial board of Lloyd's List for this distinguished award. A quick review of the Top 100 shows the titans that have made a monumental impact on our wonderful industry. I am genuinely humbled and honored to be in this select group. This award is the most meaningful in the industry since it's based on demonstrated actions and does not entail self-nominations, lobbying, or sponsorships. This award recognizes our tireless efforts to improve ship recycling standards to global ESG standards without decimating this vital asset's residual value.
The significance of Ship Recycling to the maritime industry remains undeniable. As citizens of the world, it's our sacred responsibility to leave a cleaner and greener world for our children and grandchildren. Ship Recycling is indeed a GREEN industry; the best example of a circular economy, and it must be conducted in nations that can recycle the vessels best in accordance with international standards, reduce our carbon footprint, reuse and recycle the majority of the components and also provide an economic value to owners of these assets and the workers who work at these yards.
For the last two decades, together with the assistance of ship owners, capital providers, class societies, regulators and yard owners, we have worked relentlessly towards improving safety and environmental standards in the Indian subcontinent, where most of the world's ships are recycled. I am delighted to see the industry's impressive advancements over time. As a testament to the industry's collective efforts, in about ten years, we have gone from less than 5% green vessels to 100% green vessels in India this year!
Green recycling at any cost is not a viable solution to this urgent and critical matter. Therefore, we continue to invest significant capital and human resources to ensure that vessels are recycled sustainably according to international standards by considering Environmental, Social, & Governance issues while assuring the of the asset.”
The full Lloyd's List Top 100 review of Dr. Sharma can be found at: https://lloydslist.maritimeintelligence.informa.com/LL1138839/73-Anil-Sharma-GMS
The Myth: Ships are broken down by hands in recycling yards in South Asian Countries and workers had to lift steel pieces with bare hands.
Hong Kong International Convention for Safe and Environmentally Sound Recycling of Ships (HKC) Compliant Ship Recycling Yards are equipped with cranes of different capacities ranging from Safe Working Load (SWL) of 200T to 12T. Cranes are used for distinct purposes.
In the ship recycling facilities, ships are cut in three different zones. The primary cutting zone is the vessel itself. A large slice of the vessel's hull is marked and cut as per the approved ship-specific Ship Recycling Plan (SRP). While marking and cutting the slice, factors like ship stability and SWL of the handling crane are considered. These heavy blocks are lifted by the heavy-duty crane (SWL 200 T) from the vessel and transferred to the secondary cutting zone without any contact with the intertidal zone. In the secondary cutting zone, the larger slice is cut down into smaller slices. The cutting is done in such a way that larger plates are extracted for useful applications. While doing this, the slices need to be cut in smaller sections and often aligned to get the right access for the cutting torch. Medium capacity cranes (SWL 35 T) are used for handling smaller slices in the secondary cutting zone. The same crane is used to transfer lighter sections to the tertiary zones, where stiffeners and brackets are cut into smaller parts.
The Cranes with SWL 12 to 18T are used to load the extracted steel plates into the truck used for transportation. These steel plates are transported to steel rolling mills to make steel bars which are used in the construction industry, and scrap steel is sent to electric arc furnaces.
In Indian recycling yards, only lighter pieces (lesser than 2 Kg) of scrap steel are hand lifted by the workers only for segregation purposes. They are provided with adequate PPE. Recycling facilities based in Bangladesh use cranes with magnetic grabs to handle the steel plates and scrap pieces.
The workers involved in gas cutting wear adequate PPE, including hard hats, overalls, safety shoes, gloves, masks, and gas cutting glasses. A qualified safety officer supervises the complete process.
The cranes are inspected and load tested every six months to ensure the cranes' good health by the competent authorities.
It is incredible to see the progress made by the recycling facilities in India. In the entire process of removing slices from the vessel's hull until loading on the trucks, the heavy steel pieces or plates are never handled manually with bare hands in HKC compliant yards.
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The Myth: Holes are drilled at the bottom of the tanks to discharge bilge water and waste oil from the beached vessel.
The Reality: International Maritime Organization (IMO), in its resolution MEPC 210 (63), mentions that residual oil tanks should be protected against leakage, overflow, fire, and other potential accidents. Therefore, HKC Compliant recycling facilities prepare a plan for the disposal of bilge water and waste oil present on the vessels as per Part II of the Inventory of Hazardous Materials.
At Alang, Gujarat Pollution Control Board (GPCB) and Gujarat Maritime Board (GMB) are the regulatory bodies responsible for handling the waste generated from the recycling vessels. GPCB has appointed Gujarat Enviro Protection Infrastructure Ltd. (GEPIL) to collect bilge water and oily wastes from the recycling vessels. The bilge water is transferred from the vessel into dedicated collection tanks and temporarily stored at storage areas within the yard. Bilge water is delivered to road transport tankers operated by GEPIL for further treatment at GEPIL facilities located in Alang.
The waste oil is delivered to the GPCB authorized subcontractors, which dispatch the waste oil to the refineries.
GEPIL is equipped with a bilge water separator to separate the oil from bilge water. The separated water is treated using an activated sludge process, and treated water is used for gardening as well as for suppression of dust over landfills. The separated oil is collected in the storage tanks.
Established in 1992 in historic Cumberland, MD. (U.S.A), GMS is the world's LARGEST and FIRST ISO 9001 certified Cash Buyer of ships for recycling. With exclusive representatives in all of the major ship recycling markets in the world, GMS has negotiated about 3,500 ships for recycling since inception. In addition to its original office in the United States of America, the company continues to expand its operations with offices in Hamburg (Germany), Athens (Greece), Dubai (UAE), India (Bhavnagar), Singapore, Seoul (Korea), Shanghai (China) and Tokyo (Japan).
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