Can Europe – besides Turkey – become a more important player in ship scrapping?
Nikos Mikelis: The reality is that[ds_preview] the primary locations where ships are recycled are places where ferrous scrap is needed and is imported for making steel. Naturally, it is uneconomic for a small or for damaged ships to sail thousands of miles to reach the main ship recycling centres, and for this reason ship recycling facilities also exist in many countries that have no need for ferrous scrap. Ship recycling in such cases can be seen as a service for disposing end of life ships, rather than an industry driven by the economy of steel making. Europe is the world’s largest net exporter of scrap steel. Notwithstanding the recycling of small or damaged ships, it makes no economic or environmental sense to recycle large ships in Europe in order to produce scrap that will have to compete with the large quantities of other European ferrous scrap to be sold and transported to countries most of which already recycle ships.
The scrapping industry currently struggles with low prices. Do you expect a market consolidation?
Mikelis: In the last two years Chinese imports of scrap steel have declined steeply. In this period the Chinese ship recycling industry is surviving only thanks to the government’s policy to renew the Chinese fleet through substantial »scrap and build« subsidies offered to Chinese shipowners. A drop in domestic usage of steel has led to exports of cheap steel billets during the last year, which is hurting the ship recycling industries of the other four recycling countries. Aside of temporary closures of individual recycling yards, and aside of any geographic relocation of ship recycling capacity that may take place, the overall need for ship recycling capacity will only increase so as to compensate for the increases we have witnessed in the total tonnage of the world fleet.
Will the Hong Kong Convention change the whole industry?
Mikelis: The ship recycling industry is already changing in line with the technical requirements of the Hong Kong Convention, even though it is far from being in force yet. Nevertheless, the way in which the European Commission will implement the new European Regulation on Ship Recycling in the next year or two, may well challenge the viability of Hong Kong Convention as a global regulation for ship recycling and may lead to an indefinite delay in its entry into force. This unintended outcome would be a most probable result of an unwise ban to the recycling of European flagged ships in South Asian countries because of their use of beaching and irrespective of the technical standards that have been achieved by a number of yards there. With shipowners from European countries being disallowed to recycle ships in South Asia, there will be very little motivation for South Asian yards and also for their Governments to support the entry into force of international regulation that is in fact contradicted by the regional requirements from Brussels.
