
Is This the End for South Asia Shipbreakers? - protomyth
http://gcaptain.com/is-this-the-end-for-south-asia-shipbreakers/
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ChuckMcM
Interesting read, two things stand out for me, one is that the ship breaking
in India/Pakistan/Bangledesh is not cost competitive given what seems like no,
or very little (note the comment about cementing an area) investment in the
facilities.

And the second is the huge export boosts from China in iron and steel.
(alleged in the article to be below cost but there wasn't really any support
for that argument.)

Any insights on why companies doing ship breaking wouldn't invest at least
some of the returns into their own facilities? I could understand if it was a
sort of "one and done" thing where you never expected to break a second ship,
but since they suggest there is 30 years of experience here, what is the
process whereby people don't figure out ways to do it better/more
efficiently/safer? I would expect that eventually this would be an ideal
robotics sort of application (assuming you are ok with a mobile robot carrying
around a plasma torch :-)

As for China, their behavior has been consistent over the last 50 years at
least, which is that acquiring foreign currency reserves are more important
than profits. They still import a lot of "stuff" so that is going to be
critical to economic growth. There is a long tradition of exporting natural
resources to fund those reserves, whether it is Russian's oil, or South
Africa's mineral wealth. But if they are being forced to cut prices to keep
those reserves flowing, that's an interesting data point on their economic
health.

~~~
JacobAldridge
_" And the second is the huge export boosts from China in iron and steel.
(alleged in the article to be below cost but there wasn't really any support
for that argument.)"_

The quote from the article is “China is selling below the price of recycled
steel”.

I interpreted that to mean that at current prices _new_ steel from China sold
at the market rate is cheaper than recycled steel. So no 'below cost'
shenanigans, just comparable products moving in out-of-sync market cycles.

And yes, businesses the world over can be guilty of not reinvesting in
facilities. There's a mantra for change that says "If we always do what we've
always done, then we'll always get what we've always got". Unfortunately, many
business owners in good times think that's true as well! And so they fail to
make the necessary improvements when they can, and can't afford it when they
have to.

~~~
wisty
Or it could be that Chinese companies were stockpiling steel (as the price was
rising), and are now trying to sell it off now that the price is dropping.

So if you've got a great big lump of steel, it's not cost effective to break
it apart to sell right now.

~~~
bigger_cheese
I work in the steel industry, virgin steel not recycled steel and we are
having the same problems. China has so much excess domestic steel capacity
that they are now flooding the international export market and the price of
Coil has tanked.

[http://www.smh.com.au/business/mining-and-
resources/chinese-...](http://www.smh.com.au/business/mining-and-
resources/chinese-steel-is-now-cheaper-than-cabbage-20150708-gi81ea.html)

'When asked about the cabbage conundrum, one trader told Platts he would be
"better off going home to plow the fields rather than try to make money
selling steel".'

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cconcepts
There is a lot not shown in this article. Ship breaking is extremely dangerous
and thrives in these parts of the world because you don't need to provide
safety equipment or procedures and when one of your employees gets
killed/maimed in the process there is someone else eager to take his place and
no lawsuit from the deceased's uneducated family.

If one country tightened controls on ship breaking then, by the laws of
capitalism, the work would just go to the next country with the lowest labour
costs who has less overheads so can pay more to buy the ship from its owners
in the first place.

Global(ish) controls mean temporary disruption to the status quo but hopefully
eventual improvement of working conditions for the people doing the grunt work
at the bottom.

Obviously China can't keep producing dirt cheap steel forever so ship breaking
will bounce back, hopefully with slightly less misery for its employees.

~~~
ghshephard
"Obviously China can't keep producing dirt cheap steel forever" \-
alternatively, perhaps they continue to drop the price of steel even lower.

The possibility of that is why people aren't purchasing these large ships to
wait for the price of steel to rise.

~~~
cconcepts
Agreed - I'm sure they can drop the price of steel in the short term. But when
they're eventually forced to go back to paying Australians $100/hour to dig
the ore out of the ground for them, the economic prospects of pulling ships
apart for recyclable steel will improve.

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cjensen
I'm mystified by a few things in this article. Specifically, why are
scrapyards closing?

The first thing the article names as a cause is the currently low price of
scrap steel. Ok, but then what happens when a ship gets too old to use if not
scrapped?

Another cause named in the article is new EU rules for EU flagged vessels.
Couldn't the owners just reflag to a non-EU country prior to scrapping?

~~~
steve19
> Ok, but then what happens when a ship gets too old to use if not scrapped?

The old fashioned way is to scuttle a ship.

I would guess that scuttling a ship so that it descends into a deep sea trench
would have minimal environmental impact. Any toxins would be contained by the
immense pressure.

~~~
vacri
Scuttling a ship doesn't get you the millions of dollars that you get from
selling it to a scrapyard.

~~~
jessaustin
The scrapyards that have gone out of business aren't paying that. Their
competitors, finding themselves in a more monopsonistic situation, might not
be either.

~~~
vacri
I misread the article, where it says at the moment ship owners are getting
$3.6M less than they used to. I thought it said that that was what they were
getting.

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rjanoch
A company in the SF Bay Area tried to start a ship breaking on Mare Island,
but couldn't make it work. Many ships are taken to Brownsville Texas for ship
breaking, including the ghost ships (old navy ones) in Suisun bay.

