The ship recycling industry has made a significant effort to upgrade standards but is seeing very little uptake from shipowners looking for green recycling.

Shipowners are still showing a preference for commercial considerations over responsible ship recycling complained shipbreakers, shipbrokers and cash buyers who attended the TradeWinds Ship Recycling Forum held in Singapore today.

Despite large-scale improvements by yards in India, Pakistan and Bangladesh that have led to an increasing number of them meeting the requirements of the Hong Kong Convention (HKC), cash buyer GMS president Anil Sharma told the forum that only 5% of ships being sold for recycling go for green recycling.

Darren Lepper, a director at Clarksons Platou Shipbroking, noted that in his experience, the uptake of the limited number of shipowners who enquired about green recycling stood at a dismal 20%.

“Unfortunately the majority of shipowners are more concerned about the last dollar,” Lepper said.

He added that the majority of enquiries for green recycling came from owners in Northern Europe and Japan.

The main deterrent for green scrapping is price. Yards have had to invest large sums of cash to build the facilities and develop the processes needed to meet HKC standards, and recycling ships in an environmentally responsible manner is more costly and takes longer.

Bangladeshi shipbreaker PHP Shipbreaking & Recycling’s managing director Mohammed Zahirul Islam, for example, claimed that his yard spent in the region of $3m to upgrade its facilities to meet HKC standards.

To recoup the cost of their investment, and the higher costs involved in dismantling the ships, green yards have been paying a significant discount on tonnage, which last year was as much as $50 per ldt on the non-green price.

Premium shrinking

Rakesh Khetan, chief executive of cash buyer Wirana Shipping Corp, explained that early capacity for green recycling was very limited so the premium was high. But he noted that the premium is diminishing as more yards go green and capacity increases.

A figure of $20 per ldt was given as the current discount.

Chintan Kalthia, director of Alang-based RL Kalthia Ship Breaking, said that the increased completion and the pace of green scrapping goes up as yards become more proficient at the task is part of the reason the price differential is diminishing.

This reduction has spurred more interest in green scrapping although not nearly as much as had been hoped for.

“The number of owners seeking green recycling has increased, but the actual number is still very small,” said Khetan.

 “Shipowners are not doing their part. They are sitting on the sidelines. They want everyone to improve but are not willing to do their part,” PHP’s Islam lamented.

Simon Bennett, general manager of sustainable development at shipowner China Navigation Co, said he believed that while its now costs less to scrap ships in an environmentally responsible manner than it did before, there still needs to be a major paradigm shift in the industry’s mentality before green recycling is widely adopted.