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Saturday, April 21, 2018

SUFFICIENT RECYCLING CAPACITY – INTERTANKO’S CONCLUSION SUPPORTED

INTERTANKO notes that other industry bodies have now moved to the INTERTANKO position that there is probably no shortage of capacity to recycle ships. The base case as used by Bimco provides for demand for recycling reaching the lower limit of the maximum capacity of 7.7 m ldt during 2003 and 2004 and surpassing this capacity in 2005 as the supply of decommissioned ships reaches 8.1 m ldt (Lloyd's List, 28 September 'Scrap sector can cope says Bimco').

INTERTANKO made a statement in the industry report commissioned by IMO in spring last year that "All countries currently involved in recycling have free capacity, but the ability to buy ships for scrap depends on political and environmental factors in China, Pakistan, India and Bangladesh. With increased availability of ships sold for demolition, prices will most likely plummet and the potential for making money on ship demolition may remove some potential capacity hurdles. It is worth noting that Pakistan has taken a handful of tankers for recycling in 2001.

Future recycling capacity will depend on the financial situation of the receivers, import taxes and the market for the recycled steel. A convenient beach and cheap labour are not sufficient to make money on ship demolition. Cranes or derricks are needed in order to remove sections from the ships and cut them up. Storing facilities are also needed to store equipment from the ships in order to re-sell it. Of increasing importance are facilities to enable the breaker to remove harmful substances and store it safely without causing pollution. It is therefore difficult to estimate recycling capacity accurately as it will depend on a number of factors and will increase with declining prices. However, by looking at previous recycling levels, the current level may probably be increased considerably. The amount of ships (all types) recycled over the last 20 years has varied from 43 mil dwt in 1985 to 3 mil dwt in 1989. However, there is probably a limit to how much annual capacity can be increased. It will probably take more than a couple of years to reach the record level of 1985 of 43 mil dwt, which included all types of ships. Unanticipated developments such as, for example, an explosion at a scrap yard may, however, suddenly reduce scrap capacity.