Alang Ship Breaking Case

Towards Sustainable Business:

The Challenges in Ship Breaking Industry

Dr. Sonu Goyal and N. Linthoingambi

The life of a ship or a vessel is generally 25-30 years, beyond which it is declared unfit for further use. At the end of its sailing life, a ship is sold to recover valuable steel which on an average comprises 95% of the total bulk of the ship, a process widely known as ship breaking. Ship recycling in its current form has a total market turnover of approximately $1.5 billion per annum2 and is one of the largest recycling activities globally. Recycling ships in itself is an inherently sustainable activity as 95% of a ship’s material, such as scrap steel or equipment, can be recycled or reused. Generally, 95% of a ship’s body is made of mild steel, 2% stainless steel and 3% of miscellaneous metals such as copper, brass, aluminum etc. The manner in which the recycling is undertaken, determines the impact of the activity on the environment and workers’ health and safety. Ironically, while such an activity has become low in developed countries, it has been rising in developing countries.

Scrapping of ships was a common activity in United States and Europe with the sole objective of recycling old ships to recover metals, until 1970s. With the development of high level of worker, environmental and safety control in developed countries, ship breaking shifted to countries like Brazil, Spain, Mexico, South Korea and Taiwan. Later, as the cost of meeting stringent environmental and health safety standards, increasingly made the activity difficult in these countries as well, the activity slowly shifted to Asian countries where occupational health and safety standards were not being enforced rigorously. In the absence of material substance bans, there was high use of toxic and hazardous substances such as lead paints, anti fouling agents laden with mercury, arsenic and tributyl tin, in ship building. Asbestos, a highly carcinogenic material was used to keep ships fire free. The scrapping work being labor intensive involving high risk, ship owners found developing countries attractive having a good market for the recoverable metals and low cost of labor.

Currently, ship breaking is centered on Indian sub-continent contributing to 48% of the entire industry. Most of the work is carried out in India, Bangladesh and Pakistan where the high tides are especially conducive to heaving the ships up onto the beach . China, which until 1993 undertook half of the scrapping in the world dropped out of the market when stricter environmental laws got enforced.

The global trade of ships to be broken is expanding very rapidly. The decision of the member states of the International Maritime Organization (IMO) to phase out single вЂ" hull oil tankers by 2015, will increase the number of commercial vessels requiring recycling in the coming years. Given that most ships must be scrapped after 20-25 years for safety reasons, the supply side for such vessels is easy to calculate since the age of the existing fleet is known. At the end of 2005, the world shipbuilding order-book stood at a little less than 227 million dwt (deadweight tones). This represented highest level of new building on order ever, and three times greater than the order book position 10 years ago4. Thus the challenge is only going to intensify in the years to come. There is a global shortage of facilities undertaking ship recycling that ensure environment conservation and prevent harm to human health.

Indian Ship breaking Industry: Prospects and Concerns

In 1978, the Government of India adopted a policy of importing ships ready for scrapping by the Metal Scrap Trade Corporation and created a �ship-breaking development fund’ for this purpose. Currently in India, ship breaking is mainly carried out in the states of Gujarat, Maharashtra and West Bengal. Ninety percent of the activity in India is confined to Alang and Sosiya, situated in Bhavnagar District in Gujarat, along the coast of Arabian Sea, where operations officially commenced with the beaching of the M.V. Kota Tenjong on February 13, 1983. The sea slope and the tide at Alang beach have favored the growth of this industry to a great extent. Alang is located 56 km south of the city of Bhavnagar, was identified as a suitable site for beaching very heavy ships, given its continental shelf, high tidal range (around 10 metres) and comparatively mud-free conditions.

Since its inception, the ship breakers in this region have flourished, attracting most of the world’s obsolete vessels to be shipped to the country for dismantling and scrapping. Alang has become the world’s largest ship breaking yard catering to nearly 60% of the world’s ship breaking activity, with an approximately 40,000 plus workers involved in the dismantling of the ships. Nearly 300 ships are being broken at Alang every year. Most of the ships that come to Alang are from United States, Yugoslavia, Poland, Russia, China and Japan. The Gujarat Maritime Board was given the job of installing and arranging for the necessary infrastructure: acquisition of land, planning and allotment of plots to ship-breakers and the provision of water, electricity, roads and communications.

At the peak of operations at the yard there have been as many as 100 plots in operation. There have been more than 3,677 vessels broken at the yard since operations began, representing over 27 million LDT (light displacement tonnage вЂ" the net weight used to calculate scrap value). The iron and steel recovered from the ship-breaking activities account for an estimated 10вЂ"15% of India’s steel production. Important downstream industries have developed including re-rolling mills, foundries, oxygen plants, transport and recycling and resale of a wide range of items, from turbine engines to washbasins and armchairs. At its height, during the mid-late 1990s, the iron and steel industry combined with secondary activities was estimated to be worth in excess of US$ 500 million per annum contributing significantly to the revenues earned by the Gujarat Maritime Board and the State government from this industry.

Ship-breaking processes: Ships are purchased directly or through a brokerage service usually located in India or London. The ship-breaker tries to get the best possible return on the investment by breaking the ship as efficiently as possible. Important considerations, besides the price, include the weight of the ship, where it was built and the purpose for which it was used. The resale value of equipment recovered is not