Capt. Khalil U Khan, MASTER
MARINER,
B.A, L.L.B, L.L.M,
FCILT, FRIN, FIIMS, FICS, FIFSMA, FNI, MMMSP
VICE CHAIRMAN - CILT-PAKISTAN,
REGIONAL DIRECTOR (PAKISTAN) IIMS – UK
MEMBER-SENATE (UNIVERSITY OF KARACHI)
Introduction
This Shipbreaking Industry ia also known as ‘Green Ship Recycling Industry’
“Shipbreaking is a hazardous industry for (a) workers and (b) the environment.
It is fact that at present Pakistan is one of the world’s largest shipbreaking
countries and its ranking is fourth by volume in the annually scrapped ships
around the world. Uptil now only a little attention has been paid to this
important sector in Pakistan both by the Government as well as the Business
sectors. Although the dangers are presented in shipbreaking, however, workers in
Pakistan are still not protected or trained to reduce the risks associated with
hazardous nature of shipbreaking. The industry has shaken due to freequent
accidents and deaths of its workers. Hazardous wastes recovered from the ships
are not handled, stored and disposed of in accordance with international
standard and guidelines, but dumped around the shipbreaking yards or it is sold
in the local market without any consideration of its effects on the environment.
Due to the lack of adequate technology ,equipments and legal frame work as to
proper waste- handling procedures. Presently this sector does not prevent
pollution and is reselling hazardous materials in the local market with the
risks accidents and occupational diseases associated with such waste.
In other South Asian Countries, ships are dismantled far away from the
management offices of the shipping companies. The basic responsibility for
clean and safe ship recycling lies with the ship owners who are commercially
benefited from their vessels over several years and also selling their ships in
world ship dismantling market.
As per international legislation a ship must be hazard free prior to
commencement of demolition. The cost to make it hazard free is very high.
Therfore end-life vessels (ship) are sold to South Asian countries, where they
encounter no resistance by the buyers and a good price is fecthed by the sellers
and buyers also get it cheap because of sellers saving on the cleaning cost.
More than 20 years of discussion at the international level on how to make
shipbreaking a cleaner and safer operation, has helped developing the necessary
expertise which is available to change the current practice to a more effective
safe practice. Pakistani authorities together with the local shipbreaking
industry can, by way of joint efforts with international organizations, initiate
the change needed to turn the industry into “green” .
In order to accomplish this goal, the shipbreaking industry needs to adopt more
modern methods, as practised in other advanced parts of the world, and move its
activities of breaking ships directly on the beaches to areas specified for this
purpose for containment of pollutants, proper handling of hazardous wastes, safe
use of heavy lifting equipment and the rapid emergency response in case of
accidents.
Pakistan is Signatory State to the ‘Basel Convention’ and therefore it must
ensure an environmentally sound management of hazardous wastes, if it allows the
import of end-of-life vessels. Though, new legislation such as the EU Regulation
on Ship Recycling and the Hong Kong Convention, neither of which has yet been
implemented. This shall be a good idea to upgrade legislation in the sector if
Pakistan wishes to compete with countries offering “green” ship recycling. The
pressure on Governments in ship-owning countries, for instance European Union,
as well as on the shipping industry, to ensure that end-of-life vessels are
recycled in compliance with international standards, is constantly growing. More
and more ship owners seek clean and safe solutions. A competitive ship recycling
industry must therefore be based on high standards of environmental protection
and workers’ safety.
THE SHIPBREAKING INDUSTRY
This write up is reflecting the shipbreaking sector internationally, in South
Asia, and in Pakistan to review & in order to understand the global influences
of the economy in this sector of Pakistan.
Global Perspective
Presently, the shipbreaking industry globally dismantles far more than 1,000
large ocean-going vessels, such as container ships, bulkers, oil and gas tankers
and passenger ships, every year to recover steel and other valuable metals from
recycled ships. Recycling activities are concentrated in five countries: there
are three South Asian countries (India, Bangladesh, and Pakistan), China, and
Turkey. There is a good capacity available in North America (US, Canada, Mexico)
and within the European Union amongst others Denmark, Belgium and the UK.No
doubt at present, South Asia is the global centre for shipbreaking.
In the year 2012, the Worlds Shipbreaking Sector recorded a total of 1,254 large
commercial vessels dismantled. 68% of these vessels were broken in South Asian
Ship breaking Yards. China attracted 17% of the ship recycling market (209
ships), whereas Turkey covered 12% (153 ships). Around 3% of end-of-life vessels
were recycled elsewhere. The EU represented 2.2% of the total share in 2012 with
28 dismantled ships.Pakistan is the fourth in the global Ship Breaking Industry,
both in terms of scrapped volume as well as in absolute number of ships scraped.
This data is presented in tabulated form as under;
Ships broken around the world in 2012
South Asia: 68%
China: 17%
Turkey: 12%
European Union: 2.2%
Rest of the world: 0.8%
The intensity of ship breaking activities varies and it depends on various
economic factors globally and nationally . The main factor is the supply of
end-of-life vessels which is directly depends on the global economy. In present
economic recession for example the ship owners sell older vessels for scrapping.
Maintaining idle ships may prove less economical than selling them for
demolition. At the same time, the demand for scrap steel on the other end of the
process also influences scrapping activities.The growth of the shipbreaking
sector in South Asia is linked to the growing demand for steel depending on
local and global steel prices, the scrap steel recovered in the shipbreaking
yards is sold on the domestic markets in India, Bangladesh or Pakistan, but can
also be re-exported for example to the European Union.
The main reason behind the present global scenario of shipbreaking is
comparatively low cost of labour, environment protection, hazardous waste
management, and workers’ health and safety in South Asia. There are so many
factors that have led to the current sharp increase in the number of vessels
breaking every year. On the one hand, ship owners modernizing their fleets in
order to comply with environmental standards or to increase their operating
efficiency. Another main factor is the phasing-out of single hull oil tankers,
which is to be completed by 2015.The current global economic crisis led to
reduction in global freight rates. Ship owners developed new tonnage during the
sea trade boom that took place between 2004 and 2007,and now facing an
overcapacity of ships.So,phasing out by scrapping the growth of the supply wins
the race of growth in demand.
The stakeholders in this business determine the fate of the global ship
recycling industry, market developments and practices. The ship owners make
decisions when to sell a ship for breaking and the price at which they should
sell it. Present market conditions are, that ship owners wish the highest profit
for their vessels when selling to yards with the lowest safety standards.
However, it is the ship owner who can set the standard for the recycling of his
fleet. Cash buyers (sometimes also brokers) identify a ship recycling facility
for the ship owner. In general, they buy the ship before its last voyage (often
renaming and re-flagging it) and deliver it to the scrap yard. Scrap ships cash
buyers advise ship owners on ship recycling practices and therefore play a
crucial role in providing the ship owners with a real choice. These cash buyers
will typically gain a percentage in the overall profit made from scrapping, so
they have a direct interest in increasing the ship owners’ profits. Lastly, the
shipbreaking or ship recycling yards need to apply standards for shipbreaking
activities. All the stakeholders generate revenue from ship recycling business
and therefore share the responsibility for making industry clean and safe.
Regional Perspective ( South Asia)
Traditionally, in the past, ships were scrapped where they were built: mainly in
European and North American shipyards. Due to rising labour costs, strict
regulations for environment protection and a backlog of old vessels, the bulk of
shipbreaking was moved to East Asia, in particular to Taiwan and South Korea in
the 1970s. Another drastic relocation of the business towards South Asia
occurred over the last 25 years. The World Bank report reflects the reasons: “A
large labor supply, low labor costs, and a relative lack of environmental and
occupational health.It is also important that in Bangladesh and Pakistan some of
the largest ships were scraped and also demand in future for the Shipbreaking
Industry outputs—due to requirement of relatively low grade mild steel bars and
rods for use in construction.
South Asia currently is the globally centre of shipbreaking industry with 70%
share of the international market. India is the single largest shipbreaking
country in the world.
As per the figures according to the Shipbreaking Platform for the year 2012,
covered 40% of the ships dismantled in 2012 (497 ships) in India.
Bangladesh scrapped 230 ships in 2012, or 18% of the global activity
Pakistan dismantled 124 ships, or 10%.
Not now the Pakistan but the Bangladeshi yards have a higher profit margin
mainly due to comparatively low taxes and low labor costs.
Indian shipbreaking industry is mainly located at Alang-Sosiya,Gujarat, about 50
km from the port city of Bhavnagar, where yards were first set up in 1983. There
are also shipbreaking yards in Mumbai and in Sachana.
In Bangladesh, the yards are on a beach stretch in Sitakunda located to the
north of the port of Chittagong, in the south-east of the country.
In Pakistan, the industry is situated at Gadani in Balochistan, about 50 km to
the west of Karachi.
The variety in geographical features of the shipbreaking beaches, leads to
differences in how the yards operates. The Alang beaches have a tidal range of
13 meters, and during high tide the ships are moved further up the beach. Both
in Sitakunda and in Alang, beaches are wide and muddy. In Gadani, the beaches
are shallower, sandy and dry, due to a low tidal range.
The Shipbreaking Industry is heavily dependent on following factors;
1. the regulatory framework,
2. the political conditions and
3. the economy.
There are considerable differences between the three shipbreaking countries.
However, the yards operate under comparable conditions as far as environmental
protection, health and safety provisions, and working conditions are concerned.
The ships are beached and dismantled directly on the shore. The method used for
beaching which makes it impossible to make a fool proof, pollution and Hazardous
waste material free. For example no asbestos units are set up next to the
vessel. Moreover, emergency response, for instance ambulances and fire fighters,
can hardly reach the vessels on the beach. Even if lifting equipment can be
installed on a beach, adequate heavy machinery can only be set up on stable
ground such as on the pier or in a port area.
Quite a good number of workers in all these three countries consists of migrant
workers from poorer parts of the countries. Workers are mainly recruited on a
daily wages basis without a permanent contract. Generally they usually live in
shanties next to the yards. Many of the workers are illiterate and not properly
trained for hazardous work such as asbestos removal. Regular happening of severe
accidents in the shipbreaking industry follow similar patterns: falling from
great heights, steel parts striking workers, fires and explosions, and workers
exposed to hazardous materials such as asbestos or toxic fumes. Accidents and
casualties are not fully recorded and there is no systematic more than health
screening of the work force.
Since last ten years, following continuous international & national criticism on
working conditions and environmental degradation, some of the yards have
invested in upgrading their facilities. It is observed that improvements only
happened in the Indian shipbreaking yards, where, for instance, a landfill site
has been constructed and the Gujarat Maritime Board (GMB) has established a
hospital next to the scraping yards. However, this is not publicly documented as
there are no updated independent reports substantiating the claimed improvement
in yards is not open for public scrutiny. Further, the standards used for such
working condition – as ISO 30.000 – are not reliable as the certification
procedure is reportedly dubious, or certificates are obviously worthless (a
so-called “Green Certificate” is provided without a proper procedure ).
National Perspective
Likely it is learnt , Shipbreaking in Pakistan started in 1947, before the
country’s independence, in port area and on the Gadani coast the sandy beach
(compared to the muddy beach in Bangladesh) and a deep water level allowed for
the easy beaching of vessels. The ship breaking industry grew after independence
and was most active in the 1970s and 1980s. At that time, the Gadani
shipbreaking yards employed over 30,000 workers directly and Gadani was then
considered the largest ship breaking yard in the world. For different reasons,
amongst other countries the introduction of comparatively high taxes on this
sector in 1997, the Pakistani shipbreaking industry lost its competitiveness &
business to India and Bangladesh. Few years have seen a revival of the industry.
According to the Chairman of the PSBA, Dewan Rizwan Farooqi, the year 2012
brought more business to the yards again, which reflects the global peak in the
total number of ships scrapped in 2012.
According to PSBA, the industry pays taxes of about 5 billion Pakistani Rupees (
4.7 million USD) annually out of which 30 percent go to the Provincial
Government of Balochistan. People of business fraternity in favour of the
shipbreaking industry argue that it plays an important role in reducing import
burdens for scrap steel for the iron industry in Pakistan, which in turn
contributes to the GDP, and provides employment for workers from Balochistan,
which is the country’s poorest province. The Planning Commission of Pakistan
intends to revive the industry based on “Green” Ship recycling standards in
order to increase its contribution to the GDP.
It will not be out of place to mention here that during the years 1970’s myself
was beaching master and during that period , the largest passenger ship
“Safina-e-Hujjaj” was beached by me. On this historical occasion, other
Captain’s were onboard such as Capt.K.S Sultan,Marine superintendent of Pakistan
Islamic Steamship Co, Karachi (owners of the vessel) Capt Siddi, Capt.A Saeed of
my ex Company M/s United Oreintal Steamship Co. Karachi, who were as the buyers
representative onboard.
In the 1980s, the Gadani ship breaking yard was described as the world’s
largest, with more than 30,000 direct employees producing about 1 million tonnes
of scrap. By 2001, only about 160,000 tonnes of scrap were being produced. High
customs duty and competition from ship breaking yards in India and Bangladesh
have reduced Gadani’s output. A reduction in taxes on scrap metal improved
production modestly, but it is still much below its past volume. Gadani employs
around 5,000 workers.
The legal status of ship breaking in Bangladesh and Pakistan is unclear,
there is no specific regulation even after 30 years of operation.
i) Status of existing rules and regulations in ship breaking yards in South
Asian Countries
As under;
Parameters India Bangladesh Pakistan
Specific Rules for Ship breaking Yes No No
Cargo Free Certificate Yes Yes Yes
Gas Free Certificate Yes No No
Waste Disposal Facility Yes No No
Labor Insurance Yes No No
ii) Global ship dismantling activity
Country No of Vessels * Sum of LDT % of all Vessels %of LDT
India 2,245 16,135,949 58 45
Bangladesh 529 7,737,562 14 22
China 379 4,794,533 10 13
Pakistan 192 3,521,888 5 10
Vietnam 29 372,882 1 1
Mexico 18 75,746 0 0
Turkey 109 379,641 3 1
Spain 18 59,439 0 0
Unknown 241 1,255,762 6 4
Total 3,760 34,333,402 97 96
Clarkson's total 3,877 35,681,405 100 100
Others 117 1,348,003 3 4
Source: Clarkson’s Demolition Data
*LTD : Light Tonnes Deadweight.
The cutting process
India and the other major ship breaking countries such as Pakistan, China,
Bangladesh, Vietnam, Mexico, and Turkey follow the beaching method, rather than
the more advanced dry dock method. In the beaching method, the ships come
ashore at high tide; as the tide recedes, the beach becomes the work station.
iii) Average price realization
Country Average Price paid per LDT
Bangladesh US $ 325
India US $ 300
Pakistan US $ 300
China US $ 280
Source: Clarkson’s Demolition Database, 2004
iv) Ship breaking in million dead weight tonnage
Country 2001 2002 2003 2007 2008 2009
China 5.7 5.7 10.5 n.a. n.a. n.a.
India 7.9 10.8 8.7 0.5 1.9 2.5
Bangladesh 9.4 8.8 4.5 n.a. n.a. n.a.
Pakistan 3.7 1.7 1.3 n.a. n.a. n.a.
Others 1.1 1 1.2 n.a. n.a. n.a.
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Total 27.8 28 26.2
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SHIPBREAKING INDUSTRY UPS & DOWNS
In the year 1978, Gadani beach was full of activities. Same year Gadani was
classified as a port and reduced import duties, more than 150 ships were
scrapped and produced approximately one million tones of scrap. This time was
witnessed because of our green industry. It was possible that marine and
industrial components were available at a very competitive price. The ship
scrapping industry made it possible by providing jobs to thousands of people (i.e
approx 30,000), however it was destroyed to a downward level, latter around
1980’s due to unattracted government policies and taxes on this sector.
However during the regime of Nawaz Sharif i.e, in the year 1992-93 , the Gadani
beach turned to the largest ship breaking industry in the world and made it more
than $1 Billion industry. Latter on the same Prime Minister imposed strict
tariffs on the ship scrapped at the Makran coast. These strict steps and
policies by the government destroyed the largest ship breaking industry in the
world. We obtained ships at scrap value and were able to provide valuable ship
engines and components and other repair material to entire industry marine and
non marine in Pakistan. It was pride to us that the Gadani beach also provided
raw materials to Pakistan’s Re-rolling Mills at a very low cost. However, this
situation was halted the industry by early 2000’s.
When the Government imposed heavy taxes which ruined the booming industry. This
was not only because of this but also various reasons of our social and
financial set up. Then it was felt to revive the shipbreaking in Pakistan.It was
decided by a group of this industry who have successfully lobbied for reducing
duties and taxes.The Industry has thus recovered considerably although overall
values remained far below of those of Bangladeshis and Indians.
At this time, the Pakistan Shipbreaking Industry as well as Indians needed
something to boost their Shipbreaking Industry. Fortunately, this vessel
‘Kapetan Machalis’ the biggest tanker available for breaking in the market, and
both the countries were interested, however, Pakistan was successful in
acquiring Kapetan Michalis for scrapping.
‘Kapetan Michalis’ was considered by then being the world largest ship available
to be scrapped in Pakistan, will overcome shortage of iron / steel badly needed
for construction projects and it will revive the slow movement of this industry.
It was estimated that it will take about 1 year to dismantle this largest ever
ship in Pakistan being scrapped. It was an experience for everyone in the
industry. The scrapping of Kapetan Michalis gave lot of opportunities to the
people of the ship breaking industry which was sinking at that time.
The ship breaking industry was capitalizing in Europe at this time, but high
wages and the increasing cost of keeping environment clean, hygienic conditions
and safety standards, provided Asia to emerge as an alternative. Now, most of
the vessels were on the beaches of India, Bangladesh and Pakistan, where
environmental and other regulations are either non-existent or not clearly
enforced.
SHIPBREAKING SCENARIO
Pakistan’s Shipbreaking industry started struggling since in the year 1997,when
the introduction of taxes, sales and higher duties on purchasing vessels for
ship breakers, it made difficult to earn a reasonable profit.
In the early 1990s, a 45 percent customs duty was imposed on ships imported for
dismantling. This adversely affected ship breaking activities at Gadani, almost
halting the industry by the early 2000s. In recent years, ship breakers and
local authorities have successfully lobbied for reducing duties and taxes. The
industry has thus recovered considerably recently, although volumes are far
below those of Bangladesh.
Ship breaking is the largest industry in Balochistan province providing local
employment to 20–25 percent of the total Gadani workforce and a major source of
tax revenue for the provincial and federal government and for the Balochistan
Development Authority (BDA). It is reported that the federal government proposed
additional taxes on ship breaking activities recently but that these were
dropped after the intervention of the Chief Minister of Balochistan.
At the end I would like to give here under some very interesting information as
to our the most important shipbreaking industry.
At Gadani there are 132 ship breaking plots. Some two-thirds are under private
ownership; the rest are owned by the BDA. At present, about 30 active ship
breakers operate on land leased either from these local landlords or from the
BDA. There is a lot of attraction to get scrap steel for the considerably usage
in construction sector.
About 75 percent of the ship breakers are from the Gujarati community, 20
percent are from the Punjab, and the remaining 5 percent are of Pathans and
other descent.
The main entry barrier is the availability of ship breaking yards and plots.
Actually, there is no real exit hindrance, and plot owners can leave at will.
The Pakistan Ship Breakers Association formed in 1979 is the main organization
in the SBRI in Pakistan.
Given the present political conditions in Pakistan, it is difficult to get a
clear picture of current market conditions for ship scrap steel. Ship plate and
melting scrap from Gadani are used as an input to the 50–60 re-rolling mills in
Sindh and Balochistan. The research primarily indicated that some 70–75 percent
of Gadani’s production is destined for Karachi’s re-rolling mills and 25 percent
for the Punjab. The industry is thus significantly localized, with small
re-rolling mills in particular dependent on ship breaking for their production.
Pakistan’s steel industry has undergone a difficult period in the past decade.
Total consumption in 2005 was estimated at 4 million tons. In the so-called
unorganized sector, there are,
I) 80 scrap melting plants (mainly induction furnaces)
II) 334 re-rolling mills. Most of them are located in Punjab.
III) 250 in Lahore, 16 in Islamabad, and 16 in Gujranwala
IV) 52 in Karachi, Sindh.
Gadani ship scrap’s contribution to Pakistan’s Steel consumption and production
is also significant, though difficult to assess. With an average output of
500,000 tons per year, it could account for up to 15 percent of Pakistan’s Steel
production.
Desirable actions for South Asian countries towards Ship Breaking Industry
At present, according to the Shipbreaking Platform, India and Bangladesh are the
world’s largest ship breaking countries. Pakistan is in terminal decline
• More investments are needed in Pakistan to achieve an adequate institutional
capacity,
• Provide ground-level protection for SBRI workers,
• Enforce environmental regulations.
Although the SBRI industry is situated in a relatively unpopulated area,
infrastructure improvements are needed in the capacity and safety of the main
road for transport of all waste and reusable materials generated in the ship
recycling yards.
Significant infrastructure and capacity development in the hazardous waste
management sector is required in particular in the long term in order to achieve
proper storage and disposal levels leading to compliance with national
regulations, the Hong Kong Convention, and other relevant international
agreements.
Investments in hazardous waste management and waste disposal may present
opportunities for engaging in public-private partnerships to the benefit of the
local urban area of Hub, the greater urban zone of Karachi, the Port of Karachi,
and the ship breaking and recycling industry.
Environmental protection and workers’ safety are matters of great concern. Sea
water, soil, ground and surface water, and air are all being polluted; however,
the research community is divided on its severity. Casualties at the yards,
mostly due to fires and falls, are declining in Pakistan but are still high, and
not all cases may be reported.
ABOUT THE AUTHOR
An Educationist & Scholar Prof. Capt Khalil U Khan. He started to serve
education from his childhood, he started tuitions in the night colleges/classes
famous at that time in Karachi while he was in matric, for completion of his
education and the same journey never stopped. He joined Merchant Navy in the
year 1959 and sailed around the world till 1970, last 3 years he served as a
Capt, along and distinguished career in the service and left the profession to
be with his family and started his business carrier from grass route level.
Alongside his business activities he pursued higher education, a passion
interrupted by seafaring, achieved LLM qualification with distinctions and was
awarded Gold Medal from Karachi University. He continued imparting knowledge
through teaching in various capacities as Nautical Instructor, Law Teacher and
Dean of the Faculty of Law at a private University. He has been appointed as a
visiting Professor in Federal Urdu University in the year 2012 and still
delivering lectures. For last forty four years, he has been associated with
national and international educational institutions. He is doing business as
Consultant & Surveyors in the field of Marine, Insurance & Banking etc.
Capt. Khalil U Khan is a Senior Master Mariner. He is L.L.M (Master of Laws)
position holder and has been the Dean of Law at the DIHE Karachi, Chartered by
Govt. of Sindh. He is a Nautical & Insurance Consultant and Authorized Surveying
Officer, Licensed by Govt. of Pakistan. He is the Chairman of Oceanic Group of
Companies.
He is also Regional Director and Fellow of International Institute of Marine
Surveying, U.K, (IIMS) since 1993, Fellow of Nautical Institute (NI), Fellow and
Vice Chairman of Charted Institute of Logistic and Transporter (CILT), Fellow of
Royal Institute of Navigation, U.K. (RIN), Fellow of Institute of Charted
Shipbrokers, U.K. (ICS), Fellow of International Federation of Ship Masters
Association (IFSMA) Founder Life time Member and has been Founder Treasurer of
Master Mariner Society of Pakistan(MMSP) & Member of Pakistan Institute of
International Affairs (PIIA). He is active in Karachi Chamber of Commerce and
Industry particularly in Shipping & Education Committee. He is also the Member
of Surveyors and Loss Adjusters Association – Pakistan (SAAP).
Despite his multifarious activities in professional, business and social
circles, Capt. Khalil U Khan authored a Book titled “The Shipping Scenario in
Pakistan” besides his LLM thesis on “The Elements of Contract of Affreightment”.
He has presented many papers in International Conferences, Seminars & Meetings
on Shipping, Surveying, Insurance, Law and Maritime subjects.