- Shipbreakers Vie for Scrap From
Navy's Discards
- Concerns on Environment
- An Indian Player's Big Plans
CHESAPEAKE, Va. -- Harsh
Mishra, a businessman from India,
stepped carefully along the jagged hull of a 50-year-old Navy submarine-rescue
ship called the Sunbird. His workers had spent days tearing it open like a
giant sardine can, revealing a maze of bunkrooms, pipes and engines below.
"Money doesn't always look pretty," said
the 46-year-old, speaking through a haze of fumes from noisy diesel engines and
odors from aged, rotting ship hulls.
Dismantling the 220-foot ship took three months and
generated 1,200 tons of scrap metal valued at about $300,000, not including the
engines, anchors and propellers that were sold separately. The U.S. government
paid Mr. Mishra's company, Bay Bridge Enterprises LLC, an additional $85,920
just to take the ship, laden with environmental hazards, off its hands.
The Sunbird came from a group of about 129 old
ships, collectively known as the "Ghost Fleet," which sit idle in a
half-dozen ports around the U.S.
These ships, maintained by the U.S. Navy and the U.S. Maritime Administration,
or Marad, have become a juicy target for the industry known as shipbreaking.
All but shut down for a few years in the late 1990s amid environmental
concerns, the shipbreaking business in the U.S. is now making a comeback. It
is being fueled by a convergence of government action with developments in the
global steel, energy and freight industries.
The driving force is the steel business, which is
booming amid demand from China
and other fast-growing economies. Just under two-thirds of the one billion
tons, or $400 billion, in new steel produced each year comes from iron ore; the
rest is recycled from torn-up cars, washing machines, ships and other forms of
scrap metal.
Steel mills around the world buy roughly $100
billion of scrap steel each year. Old ships are a major source of this recycled
steel, providing as much as 5% of the scrap metal consumed annually.
Voracious Appetite:
But there's a shortage of old ships available to
feed the steel industry's voracious appetite. With a global commodity boom
under way, older ships are being kept in operation longer than normal to carry
freight, oil, coal and other raw materials, not to mention huge amounts of
scrap steel. Shipbuilders are expanding production, but it typically takes
three years to build and launch a new freighter. Despite the huge demand for
steel, Lloyd's List, a London-based maritime-industry trade publication,
reports that about 232 vessels were scrapped in the first 10 months of 2005, down
from 422 ships scrapped during the same period last year.
That helps explain why Mr. Mishra and other
shipbreakers are fighting for a piece of the Ghost Fleet. Old ships can be
bought all over the world, but the U.S. has one of the largest
government-owned stockpiles and an active program to get rid of the ships for
scrap or other uses.
Marad maintains three fleets in Virginia,
Texas and California, spending thousands a year per
ship trying to prevent corrosion, mold and mildew growth. As ship custodians
for the federal government, the agency decides when to get rid of ships by
paying a company to scrap them. Otherwise, the agency can sink ships in the
ocean, either as part of military testing or to create artificial reefs for
fish and scuba divers.
Shipbreaking has a long, dangerous and
environmentally tainted history. Places like Bangladesh,
Pakistan, India and China have become huge centers for
shipbreaking. Lax regulations in many places allow companies to simply drag
ships onto beaches and tear them apart. That creates huge environmental and
worker-safety concerns. Workers in those countries often lack basic safety gear
and can be exposed to dangerous substances like asbestos. Oil and other
hazardous materials are routinely spilled into the sea.
Highest Bidder:
For years, commercial and government owners of old
ships in the U.S.
and other countries sold their ghost ships to the highest bidder, home or
abroad. In the U.S.,
the dirty business was handled by a shadowy group of companies that dodged environmental
regulations by frequently moving and changing company names. The business was
virtually shut down after a series of articles in the Baltimore Sun in 1997 exposed industry
practices. The government tightened regulations on domestic companies and
stopped scrapping vessels overseas. A backlog of aging government ships soon
developed.
Now, the U.S. government is forcing Marad to
get rid of its current batch of aging ships quickly to avoid expensive
maintenance costs. With tight environmental rules making shipbreaking more
expensive in the U.S.,
Marad pays domestic firms to take the Ghost Fleet ships.
Workers at Bay Bridge Enterprises in Virginia cut scrap metal
from the inside of the Sunbird, a submarine-rescue ship that was dismantled at
the shipbreaking facility.
The policy shift has been a boon in recent years
for domestic shipbreakers, including four in Brownsville, Texas:
International Shipbreaking Ltd., ESCO Marine Inc., Marine Metals Inc. and All
Star Metals LLC. It also required them to change their practices and business
models.
Richard Jaross, 65, president of ESCO Marine and a
35-year industry veteran, says the industry has moved from being labor
intensive to capital intensive. With 160 employees and about $25 million in
revenue, ESCO is spending millions on new equipment to cut and clean metal from
the ships, he says. He has hired environmental experts to make sure workers
follow government regulations on removing and disposing of fuel, asbestos and
other chemicals as they tear apart the ships.
In 2003, Marad, concerned that domestic
shipbreakers couldn't dispose of the ships fast enough, tried to send 13 ships
to Able UK Ltd., a shipbreaker in Teesside,
England.
Environmental groups on both sides of the water fought the transfer of the
ships. Delivery of the last nine ships is being held up by a lawsuit in the United Kingdom.
U.S. environmental groups say they would rather have
government ships scrapped in the U.S.
"From an environmental perspective, we should be responsible for our own
waste," says Michael Town, Virginia
chapter director of the Sierra Club. "And if we sent the ships overseas,
we can't control the environmental impacts." He said that although
shipbreaking is an industry few want in their community, the U.S. companies
are more responsible and also provide hundreds of jobs.
In the confluence of Marad's backlog and the strong
demand for scrap steel, Mr. Mishra's firm Adani Group, a fast-growing
commodity-trading company based in Ahmedabad, India, sees an opportunity to become the biggest
U.S.
player.
Adani, with annual revenue of $3 billion, is the
largest importer of coal to India
as well as a major importer of scrap metal. Shipbreaking is a small new venture
for Adani, but it has big plans. It wants to open a second shipbreaking
facility on the West Coast and to buy a scrap yard on the East Coast to export
up to 1.2 million tons of scrap metal per year to India.
Last June, Adani bought Bay Bridge
for less than $10 million, Mr. Mishra says. Bay
Bridge operates from a small
construction trailer on a football-field-long muddy finger of land extending
from an industrial section of Chesapeake into
the Elizabeth River. The property has 2 large berths,
where ships are parked during dismantling. Two 150-ton cranes loom next to the
ships and are used to swing clumps of metal and other debris off the ships.
Adani has more than doubled the number of workers at Bay Bridge
to 93 since acquiring it.
Already, International Shipbreaking of Brownsville
is being forced to compete fiercely with Mr. Mishra's firm, which has been
winning a larger share of ships from the government. "For a while, there
was nobody cutting ships," says Bob Berry, chief operating officer of
International Shipbreaking. "You couldn't do it because of all the environmental
regulations and safety regulations you have to deal with. It cost a lot more to
scrap a ship than the ship is worth in parts."
Besides the four shipbreaking companies in Texas, there are a
couple of others on the East Coast, but virtually none on the West Coast.
Hoping to tap the Ghost Fleet in San Francisco
Bay without the long, expensive
journey through the Panama Canal, Mr. Mishra is planning to set up a second
shipbreaking facility in Oregon.
He is hoping to select a site by next month and to dismantle nine to 12
government vessels there each year.
In some Oregon
towns, Bay Bridge faces opposition from
environmentalists, who fear a phenomenon called "hull fouling." The
concern is that tiny organisms such as mussels and algae attached to the aging
Ghost Fleet vessels docked in San Francisco
could harm Oregon's
rivers and bays if released there.
Risky Business:
The environment is only one challenge for the
industry. "This is an inherently risky business. You could lose your shirt
or you could get lucky," says Mr. Mishra. He points out that shipbreakers
must bid on contracts months in advance and "you don't know what the steel
scrap prices will be four or five months down the line."
The business is also dangerous. Mr. Berry, at International
Shipbreaking, says his firm, which employs mostly Hispanic workers, has
experienced some fatal worker accidents in recent years. "It can be a
dangerous business," says Mr. Berry,
"but we make it as safe as it possibly can be."
At Bay
Bridge, workers in
protective suits and respirators first drain oil and remove hazardous materials
such as asbestos-laden insulation and cables coated with polychlorinated
biphenyls, or PCBs. They then rip out copper plumbing, metal bunks and lavatory
appliances.
Taking apart the ship itself usually starts at the
top, with workers using blowtorches to cut the hull into removable chunks.
Shipbreakers must consider the weight and balance of a ship as they do this, to
make sure the ship doesn't tip from side to side during the demolition process,
potentially injuring workers.
On a recent day, Sheldon "Patrick" Dass
and other workers were down inside the Sunbird with hand torches, slicing up
rusty file cabinets, piping, sinks, beds and metal walls.
"You've got to know what you are cutting,"
says Operations Manager Denson Spence, 47, who often joins the men in cutting
up the ships. "You don't want to cut the wrong thing." Platforms
could collapse, a pipe leading to a tank could explode or a cut below water
level could cause water to gush in.
Daniel Reppert, 25, sat behind the wheel of a huge,
yellow front-end loader, watching wads of scrap get lowered onto piles in front
of him. Mr. Reppert's job was to sort the metal, creating piles of copper
piping in one spot, steel plate in another. At a nearby scrap yard, workers
sorted the metal further and then ran it through huge shredding machines.
When the work day was done, the men headed for a
special locker room in a "decon" trailer in a fenced-off area. They
decontaminated their work clothes by placing their white, disposable plastic
suits in a sealed bin and their cotton work uniforms in a hamper to be washed.
They showered and scrubbed with industrial soaps. Half the laborers at Bay Bridge
are Hispanic, and most start at $8.50 an hour.
Bay Bridge gets most of its ships from the Ghost
Fleet, which has a collection of ships stationed on the James River, a half-day
boat tow away.
The Maritime Administration gave 33 ships and about
$35 million to a half-dozen certified recyclers around the country in 2004 and
2005. By contrast, the agency made $35 million from 1991 to 1994 by selling 81
ships, before it stopped selling ships to third-world shipbreakers.
Not all Ghost Fleet ships are earmarked for the
scrap yard. Some are bound for museums. Some were called back into service
during the Iraq War and during the aftermath of Hurricane Katrina. Others are
bound for watery graves. The Hoyt S. Vandenberg, a Cold War-era mobile tracking
ship nicknamed "The White Ghost," could be sunk in the Florida Keys to create a fish habitat.
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Workers at Bay Bridge Enterprises in Virginia cut scrap metal from the inside of the Sunbird, a submarine-rescue ship that was dismantled at the shipbreaking facility.
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Source: Wall Street Journal. By Paul Glader. 10 January 2006
