The last three years have been extremely significant in
the shipping industry as a whole and has been a wake up call to several
industry veterans. The starting of the market crash and collapse in 2008 with
the slow but steady rise since then has forced many industry players to
re-think their strategy and positions across the globe and sectors. Throughout
the world shipping companies have closed shops or relocated to more friendly
jurisdictions and pruned their top staff and management in order to conserve
costs and running expenses. The “green dollars” industry slowly turned into the
“red dollars” industry. The veteran shipping banks do not want to finance
shipping any further thereby accelerating the rate of foreclosure leading to
forced sale of Vessels across High Courts in Singapore, India, Bangladesh and
even China.
The Role of a Cash Buyer:
Companies such as WIRANA within the ship recycling industry
are known as Cash Buyers since they purchase, from the Owners, the Vessel,
basis 100 percent cash. In turn the Cash Buyer would sell the Vessel to a ship
recycler in any one of the ship recycling countries. For Vessels purchased
basis “as is” the Cash Buyer takes over the Vessel at the delivery port and
then boards his own crew for the sailing of the Vessel. In the meantime the
Vessel is re-flagged, given a brand new name and is provided a fresh set of
Insurance cover for the voyage to the recycling yards. Therefore WIRANA is
rightly referred to as an underwriter of recycling market risks. Due to
fluctuations in steel prices in an extremely volatile market the Owners /
Sellers could stand to lose millions of dollars by the time the Vessel arrives
at delivery Port. Irrespective of market conditions Principals of WIRANA have
stood by the Owners and Sellers like the ROCK and have underwritten as part of
their regular market practice.
WIRANA upon delivery of the Vessel in the Indian
Subcontinent accepts Letter of Credit (LC) as the mode of payment from their
end ship recyclers something which the original Owners maybe unwilling to
accept or perhaps may have little experience in negotiating and therefore
Owners prefer to work with Cash Buyers and it is estimated that atleast 98
percent of vessels for recycling are sold via Cash Buyers. Therefore at all
times the Owners remain completely secure as their final payment from WIRANA
for the Vessel is NOT contingent upon receiving funds from the end ship
recyclers which clearly demonstrates that WIRANA act as the cushion between the
Owners and the End Buyers of the Vessel.
Therefore WIRANA provide an important economic and
distribution function to the Owners as Owners now deal with one single WIRANA
who inturn deals with 300 ship recyclers between India, Pakistan, China (North
and South), Turkey and Bangladesh.
WIRANA has the inhouse resources to continuously monitor
the markets thereby placing WIRANA in the unique position to accurately and
firmly guide Owners. This knowledge is country specific and involves the spread
across the five major ship recycling markets. Using this position WIRANA
remains fully abreast about various Government regulations and is constantly
being updated thereby leading to an increase and maximization of the asset
value for the Owners.
The Intervention of the Judiciary:
India:
Both India and Bangladesh have seen their fair value of
litigations involving the ship recycling markets. In India the arrival of the
MV BLUE LADY ex SS NORWAY caused a huge uproar due to the alleged quantities of
asbestos and other hazardous materials on her. The matter was dragged right
upto the Supreme Court of India which is the apex Court body deciding on major
issues. The Supreme Court handled the matter for months and then laid down
extremely stringent rules and regulations for the governance of the ship
recycling industry. The rules and regulations came to be followed by all
sectors and industries involved with ship recycling and it was essentially
directed to set the chaos in order. Some of the salient features of the Supreme
Court order were:
Submission of the Ship Recycling Plan (SRP).
Details of the Vessel including best possible quantities
of wastes on her.
Ship recycling schedules with sequences of work.
Operational work procedures
Availability of work handling equipment and PPEs
Plan for removing of oil and cleaning of tanks.
Hazardous wastes handling and disposal plans.
Gas Free for Hot Works certificate issued by the
competent authority.
Identification and marking of all no breathing spaces.
Identification and marking of all places likely to
contain hazardous wastes.
Confirmation that ballast water has been exchanged in
high seas.
Dismantling stage
Waste water down stream stage.
Bangladesh:
The Bangladesh ship recycling industry was hit by the
landmark environmental litigation initiated by the Bangladesh Environmental Law
Association (BELA) which sought inter alia directions from the Supreme Court of
Bangladesh on the safe and environmentally sound recycling of Vessels arriving
for recycling at Chittagong.
Sensing an immediate concern to set the house in Order
the Supreme Court of Bangladesh banned the working of the recycling industry
for 10 months in 2011 and directed the Shipping Ministry and Ministry of
Environment to frame “Ship Recycling Guidelines” within a time frame of six
months. Relentless efforts by BELA saw the industry running in all four
directions to comply with the Order of the Apex Court which mirrored the Order
passed by the Indian Supreme Court. For the very first time Vessels arriving
Bangladesh were required to be Gas Free for Hot Works (Naked Flame Rules) as
well as opposed to the plain Gas Free for Man Entry requirements which are far
less stringent and less onerous.
Ship recycling is an important social economic activity
which provides direct and indirect employment to over 500,000 people. Looking
at the growing economic burden and perhaps the lack of contribution due to
closure of millions of dollars in terms of direct and indirect taxes the
Supreme Court allowed the temporary re-opening of the industry in May 2011 for
a period of three months further extendable upon the terms and conditions
determined by the Court.
Pakistan:
Unfortunately Pakistan has consistently lagged behind the
global race on upgrading themselves to the next tier. The yards there continue
to be rudimentary in nature heavily relying upon human work force and labor
with little care for industrial rights and consequent violations. The inherent
lack to upgrade perhaps stems from the less number of vessels arriving each
year for recycling to Pakistan which is directly proportionate to the price
being paid by shiprecyclers.
Recycling Capacities:
India
In India the shiprecycling activities are principally
carried out at Alang which is situated on the West Coast of India in the state
of Gujarat. At the moment Alang has approximately 175 active and fully licensed
and functional yards which are leased by the Government of Gujarat for a period
of 10 years to shiprecyclers with the leases being renewed upon their expiry
appropriately. To complement the yards at Alang we have some recycling yards at
Jamnagar which is a few nautical miles away from Alang but again in the same
state of Gujarat. The unique strength of Alang is that they rely upon the
beaching tides which vary month to month in order to derive the maximum
advantage of the force of the water to push the vessel upto the beach. Ofcourse
some vessels that are dead and under tow or those of extremely low LDT do not
require meeting the beaching tide schedules and can beach at any time during
the month. Both Alang and Jamnagar are under the aegis of the Gujarat Maritime
Board (GMB) which operates under the directions of the Government of Gujarat.
More than 8000 Vessels have been scrapped at Alang so far
since 1983 generating steel output in excess of 90 million tons. In an average
year Alang recycles about 600 Vessels with annual sales turnover from this
activity of about of about USD 1.6 billion.
Bangladesh
In Bangladesh there are approximately 55 shiprecycling
yards which are fully functional and meeting the recycling needs of the nation.
This industry now comes under the Ministry of Industries as opposed to the
Ministry of Shipping and any ship coming inwards for recycling is required to
obtain a “No Objection Certificate” in order for the Letter of Credit to be
opened from the shiprecyclers bank. Unless this is provided the Bank will not
start the various procedures required for the release of the Letter of Credit
which may then considerably delay the beaching process of the Vessel. In
Bangladesh as well Vessels are beached accordingly to respective beaching tides
and Vessels need to strictly meet these tides in order to prevent considerable
waiting at anchorage sometimes upto 14 days until the next tide.
Pakistan
In Pakistan there are approximately 25 shiprecycling
yards at the coast of Gadani in Baluchistan which are under the Ministry of
Revenue but outside the territorial jurisdiction of Karachi. The inwards
formalities are little and vessels are beached without any hassles considering
that no tides are required to be met. Therefore any Owner looking for quick
beaching and swift money in the pocket may perhaps find his solace and answers
in Pakistan as opposed to India and Bangladesh.
ISO Certifications:
India
In India there approximately exist more than 20 licensing
bodies and the industry is extremely and heavily regulated with little possible
gaps. With the stepping in of the Supreme Court the industry realized the
urgent need to upgrade themselves to the ISO Club. So in this very tough and
competitive environment the shiprecyclers spent their own funds and invested
manpower to meet the stringent standards of ISO without any financial or other
support from any third party. Currently atleast 100 yards are certified with
ISO 14001/9001 and OHSAS 18001 and atleast 50 yards have the ISO 30000.
Bangladesh
Out of the 55 yards atleast 25 yards have the ISO
14001/9001 and OHSAS 18001 including the ISO 30000 which is remarkable
considering the levels of Bangladesh some years ago. We applaud the initiatives
taken by the shiprecycling community to raise the bar and improve the health
and standard of living of their workers and their surrounding environment. This
indeed shows that even in non subsidized economies and coming from those
industries that receive little or no support from the Government a small group
of recyclers are making all efforts to make that “big change” something which
shall benefit the future generations of the shiprecycling industry and those
directly and indirectly connected with it.
Pakistan
Unfortunately for Pakistan they have lagged behind even
in this race and out of the 25 shiprecycling yards none of them are even the
basic ISO certified. The lack of interest as explained earlier stems from a
variety of reasons including the less offering of Vessels and the potential
terrorism ridden economy dealing with a highly unstable Government and regime.
For Pakistan the adoption to ISO standards seems difficult in the foreseeable
future. Until adopted and strictly enforced the industry will continue to work
using old practices and methods.
Process of Beaching: Clean and Green way in the forward
march:
The beaching method for ship recycling has been
successfully practiced for several years along the 10 km long beach at Alang
which has a very high tidal gradient, leaving vessels out of the water during
low tide. In order to pronounce a particular method of ship recycling as
environmentally friendly, an exhaustive study of beaching or drydocking should
be carried out, and only then can one conclude accurately on any particular
method.
A comparative life cycle assessment has been initiated of
beachings compared to dry-docking in India, and involves estimating the
environmental footprint of each for both facilities construction and subsequent
operation. In the preliminary analysis it could be clearly seen that the
capability of the beaching method practiced at Alang to recycle is far superior
than the dry dock method followed elsewhere.
For the drydock approach to scrapping the infrastructure
requires cement, concrete and the steel during construction and a power supply
for operation adding to environmental footprint.
At Alang the following agencies of the Government of
Gujarat are involved upon the arrival of the Vessel for inward clearances:
Gujarat Maritime Board
Gujarat Pollution Control Board
Explosives Department
Customs
Atomic Energy and Research Board (AERB)
The wastes that fall in the inter-tidal zone and on the
dry portion of the ship recycling yard during the dismantling of Vessels
remains the same in quality and quantity irrespective of the dismantling method
followed. Those criticizing beaching methods have little or no experience of
recycling a large number of different types of Vessels.
They have, at best, broken a few small Vessels and
committed them to landfill sites. The International Maritime Organization’s
International Convention for the Safe and Environmentally Sound Recycling of
Vessels (now the HK Convention of 2009) is indeed a most welcome step since it
has provided, for the first time, an international convention that addresses
and hopefully systematizes all the operations, so that health and safety of
workers and prevention of pollution of the environment, both at sea and ashore,
can be ensured and verified. In the unlikely event that the beaching method of
ship recycling is banned, a far greater socio-economic harm will be caused to
more than 500,000 workers who are employed in the recycling yards on the Indian
sub-continent than any adverse effect on environment. In addition this will
have disastrous consequences on the indirect industries that are fully
dependent on this recycling industry for their daily needs.
The benefits of ship recycling by beaching methods as
carried out in the Indian sub-continent is environmentally and economically a
sound practice and safe for workers; the industry is labor and capital
intensive, economically viable for all stakeholders and a highly sustainable
activity, considering the socio-economic situation in the region.
Shiprecycling verses Shipbreaking:
Often we see leading “shipping” publications switching
between the words “Shiprecycling” and “Shipbreaking” and perhaps the confusion
stems from the “lack of knowledge” in the eventual end use of the Vessel by the
ship recycling yards.
During the process of ship recycling the following items
are recovered for re-use and re-circulation in the markets:
1. Ship steel – this is the primary material from the
ship and is used by the steel re-rolling mills to convert in to rods and bars,
which are used in the infrastructural projects and in the ever growing
construction and other allied industries in the Indian subcontinent.
2. Ropes and Chains – these are generally re-exported for
re-use in the maritime industry or re-used by the ship recyclers themselves at
their yards.
3. Generators – these are used in most major industrial
concerns such as garment manufacturing and washing units or in the agricultural
sectors where there is shortage of regular power supply or generation. Often
major Owners seek these for their sister Vessels trading in other jurisdictions
and therefore this may form an important item of export.
4. Boilers – these are used in rice and jute mills across
the country. Again these sometimes form the bulk of the export orders due to
their high re-use value.
5. Furniture, beds, cots, bunks, cabin materials – these
are either purchased by mid-tier households and / or by public hospitals,
emergency camps, hotels, motels, hostels, Red Cross and YMCA etc.
6. Utensils, crockeries – these are purchased by
households, emergency camps, hospitals and hotels.
7. Electrical items, electronic appliances, irons,
heaters, Insulators – these are re-used by Industrial concerns and agricultural
houses.
8. Sanitary wares, bathroom mirrors – Mid-tier households
and hotels are the biggest purchasers.
9. Food items, bottled water, packed non perishable food
stocks, biscuits, tinned food – Households and small hotels are potential
buyers.
10. Glassware – Industries and showroom owners are the
biggest Buyers.
11. Fridges – these are purchased by households, small
hotels, Industrial houses, mid tier purchasers and factories.
12. Pipes and Fittings, wires, coils, rubber –
Agricultural and domestic use for most pipes and fittings and other items.
13. Paintings / Sofas / Desks / Chairs – Households,
hotels and factories hold the biggest shopping bags.
14. Oil and other products removed – Depending on the
quality they are resold to licensed factories for their use.
15. Sludges, paints etc – Are disposed under the
guidelines framed by the Gujarat Maritime Board into specific incinerators.
16. Asbestos and hazardous materials – Are sent to the
pre-determined and Government approved landfill sites after being appropriately
bagged, itemized and sealed.
17. Rubber and other materials recovered – These are sent
to the various recycling units for their secondary market use and are often
utilized by the car and transport industry due to its durability and thickness.
In short, the recycling markets have developed a ‘reuse’
market for every nut, bolt and the kitchen sink found on board the vessel. This
industry is entirely ‘self dependant and reliant’ and infact it supplies all
the essential items to the world at large and is the backbone for many indirect
industries in the Indian subcontinent. You will be surprised but Alang in an average
year recycles about 600 Vessels with annual sales turnover of about USD 1.6
billion. Certainly ‘breaking’ would not generate this revenue income!
The IMO Convention is indeed a most welcome step since it
has provided, for the first time, an international convention that addresses
and hopefully systematises all the operations, so that health and safety of
workers and prevention of pollution of the environment, both at sea and ashore,
can be ensured and verified. In the unlikely event that the beaching method of
ship recycling is banned a far greater socio-economic harm will be caused to
more than 500,000 workers who are employed in the recycling yards on the Indian
sub-continent than any adverse effect on environment. The benefits of ship
recycling by beaching methods as carried out in the Indian sub-continent is
environmentally and economically a sound practice and safe for workers; the
industry is labor and capital intensive, economically viable for all
stakeholders and a highly sustainable activity considering the socio-economic
situation in the region.
Strange as it may sound, unlike any other industry in the
western world, the ship recycling industry does not have an international trade
association, which represents the interests of the ship recycling industry. In
light of the above, there are no media savvy individuals that can get the
message of the industry across to policy makers, bureaucrats, media and the
public at large. The gap between perception and reality is perhaps the widest
in the ship recycling industry than any other industry in the modern world. If
the shipping fraternity does not take the initiative to work together and find
practical solutions, then the day will arrive soon, when a ship for scrap is
indeed a liability and not an asset.
Wirana and Its background:
Shashank Agrawal is the Group Legal Advisor to Wirana
Shipping Corporation which is based in Singapore and can be reached on +91
9825205665 or +91 9825207746
Wirana is the OLDEST Cash Buyer and was established in
1983. In 2009 and 2010 Wirana successfully negotiated over 320 vessels with LDT
in excess of 3 million and DWT in excess of 12 million and has so far
negotiated over 2200 Vessels and a delivered a total DWT in excess of 51
million since 1983.
Wirana is the FIRST and ONLY Cash Buyer to feature in the
Guinness Book of World Records for the two ULCCs purchased with a combined LDT
of 148,691 a record which EVEN TODAY REMAINS UNMATCHED AND UNBROKEN.
Source: shipping tribune. 8 September 2013
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