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14.10.

2014

Maritime History

The demolition market
This market is the fourth of the four shipping markets according to Stopford (2009). It is linked to the other
markets by cash flow and market sentiment. Its customers are scrap yards which dismantle ships and prices
depend on availability of ships for scrap and the demand for scrap metal.
For instance, an increase in earnings decreases the probability of a ship being recycled, as it may become
irresistible for the owners to enhance the cash flow through commercial operations as long as the market
permits. Likewise, an increase in the scrap price will lead to a higher probability of ships being scrapped.
Sometimes, speculators act as intermediaries in this process, exploiting the high volatility of the market.
Regarding the business itself, recycling of ships seems to be a rather rough piece of work, because shipbreakers mainly rely on manual labour to dismantle ships, doing so ideally in a dry dock, but often enough on
sandy beaches in order to save costs.
So usually, ships are recycled without the help of mechanized equipment in a three-staged process.
The Shipbreaking industry is mainly located in Asia because there is a local market for the steel and ship
equipment and labour is cheap. At present, India, Bangladesh and Pakistan form the spearhead of the industry. As of 2005, those three countries accounted for about 90% of total shipbreaking (Stopford, 2009).
However, exceptions apply for Turkey and continental Europe despite higher labour costs and less demand
for second hand steel or equipment: high-value vessels or those with sensitive equipment such as military
ships are mostly dismantled here, because aforementioned factors carry less weight.
Furthermore, the demolition market is very mobile. Taiwan used to be a major player but quit the table in
the 90s due to increasing wages.
Last but not least, regulation of the demolition markets is a major issue:
Because scrapping mainly takes place on beaches such as the Gadani Beach (Pakistan) and under primitive
conditions, society and policy makers face a dilemma situation in this regard. On the one hand, this industry
creates a lot of jobs and yields materials with graspable economic value. On the other hand, working conditions tend to be very poor implicating high accident rates and health risks from hazardous materials such as
asbestos or oil sludge. This is closely linked to environmental issues, as oil spills pollute these coastal scrapping
areas.
So in a nutshell, the demolition market deals in ships for scrapping and is closely related to the other of the
four markets. The shipbreaking industry concentrates on areas offering cheap labour and a demand for scrap
steel, thus mostly taking place in Asia.

2014 Maritime History References: Stopford.10. 2009: pages 212-214 & 648-652.14. Slides of Lecture 11 and 12 .