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Ships for recycling is expected to increase : Dr.Anil Sharma

Ships for recycling is expected to increase : Dr.Anil Sharma

Dr. Anil Sharma, CEO of Global Marketing Systems (GMS), which buys and sells vessels and  offshore units for recycling, said in a written interview with Kaiji Press, “The challenge is  to increase the number of recycling yards that comply with the Ship Recycling Convention,  worldwide.” As the number of ships heading for recycling is expected to increase in the  future, it is important to secure sufficient recycling yards for sustainable ship recycling.  The company also provides solutions for aging ships, etc., and is strengthening cooperative  relationships with Japanese ship owners through this.

  • Dealing about 200 Vessels Annually

Business overview and annual dealing volume 

“GMS, established in 1992 and headquartered in Dubai with a global presence, is a prominent player  in the buying and selling of vintage ships and offshore vessels for recycling purposes. Our primary  focus is on purchasing ships from worldwide owners and facilitating their sale to recycling facilities  based in the Indian sub-continent, primarily India, Bangladesh, and Pakistan. We also engage in  selling end-of-life vessels to recycling yards in Turkey. GMS has been actively contributing to the  recycling industry on various fronts, including providing technical assistance to recycling facilities  seeking to upgrade their infrastructure to comply with the Hong Kong Convention. GMS believes in  Sustainable recycling, which ensures that ships are recycled safely and responsibly in accordance  with IMO’S Hong Kong Convention (HKC) guidelines. In other words, it protects the environment  from pollution, conducts safe disposal of hazardous material, safeguards workers, and maximizes  the residual value of the vessel.

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On average, we handle around 200 vessel transactions per year. However, due to the global impact  of the pandemic, the recycling volumes have seen a decrease in recent years, with an average of 120  vessels in the past two years, compared to over 300 deals in 2012.”

– Current state of the ship sale market 

“The current state of the ship sale market indicates a higher number of ships coming for recycling  in the first and second quarters of 2023 compared to the same period in 2022. During this period,  we observed the recycling of 45 bulk carriers, 15 tankers, and 41 container ships. We anticipate a  significant volume of ships from the dry and container segments to arrive in the second half of 2023.

India stands as the world’s largest destination for green ship recycling, offering a stable market  with favorable vessel pricing. While there are restrictions on recyclers to open Letters of Credit (LC)  in Bangladesh, they are still able to purchase selective smaller tonnage vessels. However, procuring  larger vessels, such as capsize ships with higher lightweight, presents a challenge. Pakistan, on the  other hand, has not been active for over seven months due to ongoing economic circumstances  within the country.”

  • Focus on Environmentally Friendly Recycling 

– Current recycling market prices and trends 

“Ship sale prices primarily depend on the ship’s type and the location of the recycling yard. For  vintage container vessels, Bangladesh offers prices as high as $580 USD per long ton, with slight  discounts for bulkers and tankers. Indian shipyards provide prices in the mid-$500 USD range per  long ton for container ships. GMS publishes weekly reports to keep stakeholders informed about  the current market sale prices. The prices currently remain higher compared to the ten-year  average due to the lack of overall supply. Looking ahead, it is challenging to predict the future prices  of ships for recycling as they are subject to global factors. However, we expect the market to  stabilize at a range of low to mid-$500 USD per long ton.”

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– Appetite of the recycling yard and their capability 

“The acceptance by recycling yards and their willingness to purchase vessels remains high due to  the low volume of vintage vessels available for recycling. However, there are restrictions on  opening LCs in Bangladesh for payment of the purchase price, leading yard owners to prefer buying  smaller vintage vessels rather than larger ships. Yard owners in India focus more on purchasing  vessels for green recycling from prominent owners. A recent trend shows an increased interest in  buying container vessels from prominent ship owners. Indian yard owners also express a keenness  to purchase specialized ships, such as LNG carriers, which contain non-ferrous metals like  aluminum. Overall, ship owners with green ship recycling requirements are increasingly choosing  India as their destination for green recycling.

Opting for ship recycling facilities in India over those in Europe offers several distinct advantages.  This region proves particularly advantageous due to the extensive utility derived from recycled ship  materials compared to Europe. Notably, the carbon footprint associated with recycled steel in India  is four times lower than that generated during the production of steel from iron ore. Additionally,  India stands as the largest global hub for environmentally friendly ship recycling. Approximately  80% of its yards are compliant with the HKC guidelines and have received certification from  esteemed IACS classes such as LR, BV, IRS, and ClassNK. As part of its future plans, India aims to  double its recycling capacity by the year 2030, with intentions to expand to 200 yards.”

  • Strong Relationship with Japanese Stakeholders 

– Current Relationship with Japanese Companies 

“We have established a strong working relationship with many Japanese ship owners, having  purchased over 100 vessels from them in past years. At GMS, we position ourselves not merely as  buyers but as solution providers for ship owners, especially for vintage and end-of-life ships. This  has strengthened our business with Japan. Moreover, Japanese companies believe in recycling  vessels in HKC-compliant yards in a sustainable way. Recently, the Japanese Shipowners  Association (JSA) visited yards in Bangladesh to engage with the recyclers from Bangladesh. In fact,  when the JSA delegation visited Bangladesh, GMS was invited by JSA to participate in the dialogue  with ship recyclers. We have also closely worked with JSA in India. We do believe that Japanese ship  owners will continue to send their ships for green recycling to India and Bangladesh in the future.”

– Promising countries for future ship recycling destination 

“We hold a strong conviction that the Indian subcontinent will emerge as the most promising  destination for green ship recycling yards. The support provided by the governments of India and  Bangladesh is truly commendable. Both countries have ratified the Hong Kong International  Convention, which emphasizes safe and environmentally sound recycling practices for ships.

In contrast, South America has only a limited number of facilities that primarily focus on recycling  smaller vessels such as boats and pleasure crafts. There is a lack of sufficient capacity to handle  larger ocean-going ships. None of the countries in South America have ratified the Hong Kong  Convention, and a similar situation exists in Africa.

The main challenge lies in garnering commitment from the administrative level and securing  financial support for the development of recycling yards and downstream waste management.  These factors play a crucial role in establishing robust and sustainable recycling infrastructure.”

  • Recycling Ability of the Yards is Important 

– Challenges for the GMS in future 

“As a prominent industry leader, our primary challenge is to enhance the number of Hong Kong  Convention (HKC) compliant yards worldwide. According to BIMCO, approximately 15,000 ships  are expected to be recycled within the next 10 years. Therefore, it is crucial to have sufficient  capacity to accommodate these vessels for sustainable recycling practices.

We recognize that ESG considerations play a pivotal role in ship recycling. To achieve these  objectives, our LRQA approved Sustainable Ship and Offshore Recycling Program (SSORP) team  comprises highly qualified and experienced professionals who provide technical assistance to yard  owners. Their expertise assists in developing infrastructure and bringing it in line with  international standards as mandated by the HKC.

SSORP offers a comprehensive and all-inclusive solution for shipowners seeking to recycle their  vessels. This end-to-end solution encompasses various essential steps. First, a thorough Gap  Analysis is conducted to identify any deficiencies in the ship’s Inventory or Hazardous Materials  (IHM). Prior to delivering the vessel for recycling, the recycling yard undergoes a meticulous audit,  ensuring compliance with the Ship Recycling Facility Plan (SRFP). The dedicated team at SSORP  then prepares a customized Ship Recycling Plan (SRP) tailored to the specific requirements of the  ship. Throughout the entire ship recycling process, diligent monitoring takes place, with regular  weekly and monthly reports provided to the shipowners. This level of effective oversight ensures  adherence to ESG standards, satisfying the concerns of various stakeholders.”

– Affect on ship recycling industry for enforcement of Ship Recycling Convention. 

“Once the convention takes effect, member states’ governments will bear the responsibility of  ensuring that ship recycling facilities within their jurisdiction adhere to the regulations stipulated  in the convention. We believe that enforcing the Hong Kong Convention and its implementation  will enhance the safety and welfare of workers in ship recycling facilities while mitigating the  environmental impact associated with ship recycling activities. Every stakeholder has welcomed  the enforcement of HKC.”

(Credit: Kaiji Press)

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