Shipbreaking in OECD
Denmark has a shipbreaking capacity working on smaller fishing vessels, but not for
larger vessels. There is a dormant capacity in the existing dry docks.
Within OECD the present capacity for shipbreaking is relatively small and the existing
capacity cannot demolish large vessels (>50,000 DWT). Even breaking up of vessels
larger than 25,000 DWT may require modifications at the demolition yards. Vessels smaller
than 25,000 DWT may be demolished without modifications to the facilities (annual capacity
in Italy is approx. 14 vessels).
The present possibilities for using OECD yards complying with environmentally sound
management (EMS) in shipbreaking are limited. "Problem vessels" exceeding the
dimensional capacity of the possible yards would be large (>30,000 GT roughly
corresponding to 50,000 DWT and 15,000 LDT).
One of the Danish owned vessels as of 1st October 2002 fulfil these criteria
for exceeding the available dimensions (of an Italian shipbreaker facility applying EMS).
There are eight Danish vessels >20 years old and between 25,000 DWT (~15,000 GT) and
50,000 DWT as of 1st October 2002 for which modifications to the facility may
The number of vessels from European OECD that is scrapped annually exceeds the European
OECD capacity for shipbreaking by far. Although, the majority of the fleet (in numbers)
can be scrapped in European OECD a number of the vessels will be considerably larger than
any of the present shipbreaking facilities in Europe and larger than most of the ship
Unless dormant capacity is revived in OECD larger vessels must be broken elsewhere. At
present the only OECD capacity for large tanker e.g. VLCC, is the beaching in Turkey,
which may in reality not be suitable due to lack of tidal gauge, and a yard in Poland,
which is not engaged in demolition.
The guideline on Environmentally Sound Management of ship breaking activity recently
approved by the Basel Convention addresses a number of issues related to the health and
safety of workers, to the protection of the environment and the general management of
hazardous waste. Two facilities, one in Spain and one in Italy, have been visited during
the project, and the screening of compliance with the Basel Convention guidance document
is given below.
The overall impression of the yard inspected in Spain is that most required safety and
protective gear was in place, although not fully used in accordance with regulations. The
different waste fractions were separated, although not stored according to the guidance
document. All other waste fractions were stored directly on the ground. The facility
operates presumably in accordance with Spanish regulations, but the overall impression is
that ship dismantling is not followed closely by authorities. The improvements needed in
terms of compliance with Basel Convention environmental issues will be significant.
The general impression of the company in Italy is that it has a good organisational
structure addressing most of relevant issues, and that a competent back-up facility exist
in the Port Authority of Naples. The procedures seems in compliance with national
regulations and it is concluded that the improvements needed in terms of compliance with
Basel Convention environmental issues are minor.
Value and cost
The scrap value of a ship is determined by the steel resale price and the size and type
of the vessel. Engines, reusable items, bunker oil, the amount of more valuable metals
such as copper and aluminium etc. account for only 3-4% of the total value of a scrapped
ship. From this scrap value the buying price is determined by the costs: mainly labour,
other operational costs, e.g. hazardous waste management and transport.
A main cost of breaking up a ship is the cost of labour. Capital costs play a role, but
only limited investment takes place in the OECD. The management and disposal of hazardous
materials plays a significant role in the price setting at the OECD yards, maybe 5% of the
cost, in addition to other operational costs.
The lack of this cost alone does not explain the price difference between OECD and the
Asian countries, where hazardous waste management is not an issue at most scrapping
facilities. Lack of management of hazardous conditions may, however, have been a factor
influencing the demolition of the large tankers. Bangladesh and Pakistan, who claims the
lion's share of the VLCC and ULCC market, do not requires
"gas-free"-certificates for tankers. This is mandatory in neighbouring India.
The transport distance to the demolition yard is a factor for the price, but it is far
more important that the ship can go by its own engine. Otherwise the ship must be towed,
which is expensive and complicates the beaching of vessels. Another transport cost is the
reused steel to the re-roll mill or smelter, which also plays a role, particularly in
EU/OECD, where fewer smelters may be buying steel.
The Danish demand for demolition of large ships may to a large extent be met by a
facility in Naples, Italy, providing environmentally sound management of the ship breaking
process. Based on the field trip to the facility it is able to accommodate the larger
vessels with modifications to the facility, but this must be evaluated case by case. The
present annual capacity corresponds presently to 14 vessels up to 25,000 DWT.