IT IS no secret that a huge flow of ship recycling tonnages is coming to the market.

During the past two years, we had been expecting recycling tonnages from two or three segments only, but geopolitical factors have pushed back the supply of those recycling tonnages substantially; money made by shipowners during the good times gives them the ability to postpone recycling decisions and wait longer in case the market changes.

However, we are now approaching a period in which ships from tanker, dry, container, LNG and PCTC segments will be sent for recycling. BIMCO expects that in the next decade, 16,000 ships equating to 700m tonnes of deadweight will be recycled which, in turn, equates to an annual average of 14m to 16m tonnes of lightweight that is 20%-25% more than the peak ship recycling experienced in 2012.

This time, such peak volumes will be seen for 10 continuous years.

If one combines current ship recycling capacity at 100% of major recycling countries (Bangladesh, India, Pakistan and Türkiye), it amounts to about 13.5m tonnes of lightweight. In addition, EU-listed facilities have an achieved capacity of 1.26m tonnes of lightweight and theoretical capacity of 2.91m tonnes of lightweight but catering mainly to EU-flagged ships.

What makes it more challenging is the fact that with HKC (Hong Kong Convention) now in force, there are no HKC-approved yards in Pakistan and just 15 HKC approved yards in Bangladesh.

Since slow recycling tonnages are not benefiting newly certified HKC facilities in Bangladesh, other recyclers are not feeling motivated to seek HKC certification. Thus, it is uncertain whether recycling capacities in Bangladesh and Pakistan will be fully available immediately when recycling tonnages start increasing.

It is difficult to fathom the likely impact of such a scenario for ship recyclers, shipowners, cash buyers and service providers as things currently stand, with yards starved for recycling for years, allowing shipowners to extract a premium for their vessels whenever they choose to recycle. 

However, that makes a good case for setting up new ship recycling facilities to cater to the increased supply of recycling tonnages. Considering that the huge supply of tonnages is going to be available for a consistently long period of about 10 years, it will give new ship recycling businesses a good opportunity to get their pay back sooner than usual.

For this reason, we are seeing ship recycling projects being announced in many countries such as Bahrain, Canada, Egypt, Indonesia, Malaysia, Oman, South Africa, UAE and individual states in India. There are also plans to double the ship recycling capacity in Alang, India.

It should also be noted that the race to reach the global net zero carbon emission target by 2050 will spotlight ship recycling because steel scrap — which forms 90% of a ship’s lightweight — helps reduce carbon emissions. Steel produced from ship scrap steel produces 67% lower carbon emissions compared to steel produced from iron ore.

There is a growing opinion that countries will limit their steel scrap exports in future and would rather use the steel scrap to produce steel in their own country. China, for example, will need 400m tonnes of steel scrap by 2030 for its steel industry.

With its decades of experience in the ship recycling industry, Wirana sees a common thread running across most of the new ship recycling projects being announced or planned, which is that a lot remains to be done before the proposed projects could be ready for commercial ship recycling.

While existing gaps in proposed projects is the subject for future analysis, Wirana can say now that prominent challenges are lack of clear local government ship recycling regulations, lack of infrastructure for downstream waste facility management, inadequate local government policy support for ship recycling, higher comparative costs of labour, and the inability to match offers for recycling candidates in line with those of South Asia.

While many ship recycling projects are being planned, not all will see the light of day. A lot of arrangements need to be planned by all the stakeholders to manage the very busy ship recycling phase that the world will witness in coming times.