3 Demand for shipbreaking, Danish Environmental Protection Agency

Shipbreaking in OECD

3 Demand for shipbreaking

3.1	Danish demand
3.2	European and OECD demand
3.3	Global demand forecast
3.3.1	Summary

The average age of the Danish merchant fleet in tonnage was 7.0 years as of 1^st October 2002 compared to the average age of 12.9 years of the World merchant fleet as of 1^st July 2002 (DRF 2002). This implies that Danish owned vessels usually are sold for continued service in other countries rather than sold for scrapping.

Table 3.1
Age and size distribution of the Danish merchant fleet as of 1^st October 2002. A subjective "old and large (>50,000 DWT)" category is shown in bold, and in italics "old" vessels larger than approx. 25,000 DWT.

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Ships are on average approx. 25 years old when scrapped based on data from 1992-1999 ranging from 22.4 to 26.9 depending on the type of vessel (CEC 2001).

A very important factor in determining the fate of an aging ship is the cost associated with taking the vessels through a survey (5^th special survey), which is part of the phase-out mechanisms built into MARPOL Annex I (Regulation 13) to the convention. This is a condition for operating the ship beyond its 25^th year (BIMCO 2002). The Danish fleet includes very few ships for which this scrap mechanism is relevant.

3.2 European and OECD demand

The following information is mainly derived from the feasibility study performed by DNV and Appeldore International on behalf of CEC (2001). In CEC (2001) the distribution of vessels scrapped in 1999 by flag state is provided. For the purpose of identifying tonnage for input to European scrapping facilities, this has been separated into geographical Europe and the European OECD member states. The large difference is due to the flag states Malta and Cyprus, which are not OECD members.

Table 3.2
European registered vessels compared to the global number reported scrapped in 1999 (from CEC 2001).

Ships	Number	DWT	GT
Global	630	17,303,964	10,256,797
Geographical Europe	186	6,146,516	3,554,791
European OECD members	84	2,404,184	1,348,261

The number of vessels scrapped undoubtedly exceeds the European capacity for shipbreaking. With an average size of some 30,000 DWT and common fleet profile, a number of vessels will be considerably larger than any of the present shipbreaking facilities in Europe and larger than most of the ship yards.

An increase in no./ tonnage of vessels requiring scrapping is predicted over a fifteen year timescale from 2001 – 2015 (CEC 2001). The predicted average annual scrap volumes for the merchant ship fleet in Europe are:

107 – 247 ships

4.3 – 11.1 million DWT

2.9 – 7.4 million GT

0.86 – 1.48 million tonnes steel

Of the number of European ships scrapped in 1999 66 % was scrapped in non-OECD countries. This represents some 93 % in terms of tonnage (CEC 2001).

3.3 Global demand forecast

In 1992-1999 between 2 and 4% of the world fleet was scrapped annually (CEC 2001).

The forecast of world demand for shipbreaking has been investigated in a recent report from the shipping association BIMCO (2002). Two scenarios for the future scrapping up to 2016 were outlined based primarily on the existing breaking capacity on the Indian subcontinent:

The "Base Case" scenario: Tankers are decommissioned continuously, e.g. due to "mixed" market conditions within the time frame defined by the revised IMO Regulation 13G.

The base case scenario toward 2016 predicts that the annual volume of ships for decommissioning (vessels >2000 GT) will range from 6 to 8 million LDT (the Base case scenario).

The "IMO Case" scenario: Tankers are decommissioned at the latest point in time according to the revised IMO Regulation 13G, increasing the tanker decommissioning in 2004-2007.

According to the BIMCO report the recycling of tankers during the first six months of 2002 has exceeded the level assumed in the IMO Case scenario. A continuation of this tendency as well as the possibility of decommissioned tankers being rebuilt into, e.g. off shore oil and gas production (FPSO or FSO ships) could remove sufficient tonnage before 2005 to eliminate the likely global capacity constraints in the IMO Case scenario.

3.3.1 Summary

A Danish "problem vessels" would be both large (>50,000 DWT or 30,000 GT roughly corresponding to 10-15,000 LDT) and more than 20 years old, because such a vessel statistically is up for demolition within a few years. Only one of the Danish owned vessels as of 1^st October 2002 fulfil these criteria, whereas 15 are >20 years old and larger than 10,000 DWT.

The base case scenario toward 2016 predicts that the global annual volume of ships for decommissioning (vessels >2000 GT) will range from 6 to 8 million LDT (the Base case scenario).