Where Ships Go to Die: Business Boom Amid Recession

May 11, 2009 — -- When times were good, shipping companies ordered huge numbers of new steel behemoths to ply the oceans. Now though, many of those same container lines are eager to get rid of their ships. The scrapping business in South Asia is booming.

The sandy beaches north of Chittagong in Bangladesh look like giant steel graveyards. Ships line the banks ready for dismantling. Others are so far disassembled that their hulls are all that is left protuding morosely from the water, according to shipping industry journal Lloyd's List. All kinds of vessels get broken down here: bulk carriers, container ships, vehicle transporters and oil tankers.

The wrecks are remnants of a disappearing world. Once they sailed the oceans as flagships of globalization. Now they're symbols of an order that threatens to sink with them.

The global economic and trade crisis is so severe that a growing number of ships, some larger than the Titanic, are being pulled from their routes and sent to scrap yards to be sold for parts. Freight and charter rates have fallen and regularly scheduled passenger lines are being cancelled. Those container ships that are still sailing can barely cover their costs. Over-capacity created in recent boom times has accelerated the trend toward scrapping ships.

Yet one boom replaces another. With shipping down, shipbreaking is the business of the hour. The shift began late last year and initially targeted ships with a combined load-carrying capacity of 10 million tons. Now the heavy rigs are being lined up too as they sit idly anchored in harbors around the world. Much of the scrapping happens in South Asia and with little regulation in place.

Running Ashore

As the economy worsens the shipbreaking business improves. The best place to beach large ships is near Alang, in the southern part of the Indian state of Gujarat. Tides are high here, allowing the ships to run ashore under their own power. Once the tide is low and the hulls are out of the water, work begins of gutting and cutting up the ships.

It's a "non-stop boom," the Hindustan Times writes. Blowtorches hiss, steel windlasses screech, and sledgehammers pound along the 11 kilometer beach. Cranes remove the superstructures from the deck. A bulk freighter that until recently might have carried bauxite or grain disappears within 40 days.

A few years ago, when globalization was in full swing, few ships came near Alang. Many of the slots -- as the dismantling sites are now known -- were closed due to a lack of demand. Now millions of dollars are being earned from the scrap metal.

Nobody knows this better than Indian-born Anil Sharma, a cash-buyer who promotes the bizarre boom all the way from Maryland in the US. In the jargon of the industry, a cash-buyer acquires ships from the shipping companies who want to get rid of their burdensome vessels. He then sells them to the scrappers. The scrap metal lands in small mills in places such as Chittagong or Karatchi to be turned into steel for the construction industry. Some parts may reemerge as hinges for shipping containers whose own demand is falling in the global downturn.

More than 1,000 Ships Face Scrapping

Anil Sharma's company, Global Marketing Systems, has grown into the world's largest buyer of scrap ships. He manages about a third of all ships doomed for scrapping. And new candidates show up almost daily. "I believe there will be more than 1,000 additional ships that will be scrapped," Sharma predicted at a convention in London last February. "The next two years will bring the liveliest business there's been so far," the Onassis of scrap told Lloyd's List.

Sharma's travels of the world's scrapping centers have taken him to the coast west of Karachi in Pakistan, where ships loiter in gigantic, watery parking lots. In some places the ships are stacked three vessels high on top of one another, he says. It sounds improbable but it fits the image of Alang, where more than 125 ships have landed between last December and March -- almost as many as in 2007 and 2008 combined.

The shipping companies must dump their old freighters to tackle a dilemma. During the global economic boom they ordered new vessels non-stop, creating over capacity in much the same way as that troubling the car sector. In cases where orders can't be cancelled, new ships are coming off the conveyer belts just as demand declines. It makes the need for selling old ships as scrap all the more pressing.

Nearly 90 percent of the world's shipbreaking happens in India, Pakistan and Bangladesh. Workers drag at steel plates on long ropes; electric cables, pipes, boilers, hatchways, and generators litter the coast. As does asbestos and poisonous sealing compounds.

Those parts that can't be smelted into steel get hawked along the road to Alang on a new kind of bazaar, Reuters reports. On sale here are doors, tables and sofas, carpeting, dishes, refrigerators, air conditioners and even a captain's bathtub.

Ships have been landing at the Bay of Bengal and in the Arabian Sea for cheap recycling for the past three decades. Shipyards in Korea, Taiwan, Japan and Europe prefer to build or repair ships in their dry docks, leaving the un-glamorous scrapping to others.

"I Live in Fear of Accidents"

A worker at Pakistan's Gadani beach earns 280 rupees -- less than three euros -- a day. Still, the scrapping regions do benefit from the industry. A country with few natural resources such as Bangladesh can make good use of scrap metal, particularly since producing its own steel from iron ore would be costly and time-consuming.

And ship scrapping in South Asia is about to become more strictly regulated thanks to new guidelines penned by the UN's International Maritime Organization in London. The deal foresees a register of dangerous substances contained in ships and demands that scrappers lay out a recycling plan. It also stipulates that ships be inspected by experts before their final voyage to scrapyards.

The new rules are expected to be approved during a meeting next Monday in Hong Kong. But even if approved, it will take years for the nations involved to ratify and implement the rules, experts warn. One exception could be Bangladesh, where a court recently ruled that shipbreaking must become more environmentally friendly.

Until such changes arrive, Chittagong scrap yard worker Omar Faruq will likely continue cutting up steel plates from the ships as he does every day. He ripped open his shin on a sharp edge of scrap last August and the wound required stitches, he told a reporter from the AFP. Others have been much more seriously injured at the shipbreaking yards -- or even killed. "I live in fear of accidents like that," Faruq said at the time. "But I'm even more afraid of not having any money if I can't get to work."

With wire reports