Is This the End for South Asia Shipbreakers?
gcaptain.com
gcaptain.com
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.
It's just a well known fact. The major iron and steel mills have 100K or so employees each. They receive billions of $ subsidies annually to save those people from unemployment and potential social unrest.
> people don't figure out ways to do it better/more efficiently/safer?
From the article, it sounds like cost is really the only competitive advantage the Southeast Asian shipbreakers have.
The capital and maintenance expense of facility upgrades would probably destroy any (cost-based) competitive advantage. Labor is really, REALLY cheap in India. The corresponding economic gap is actually a big catch-22 insofar as investing in automation, but that's a discussion for another time...
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.
So if you've got a great big lump of steel, it's not cost effective to break it apart to sell right now.
http://www.smh.com.au/business/mining-and-resources/chinese-...
'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".'
The short term risk of upgrading can be an awful lot more than financial. Vested local interests can often cause all sorts of problems. Especially if your investment in new equipment leads to you essentially trying to compete on highlighting local environmental and labour abuses. Combine that with humanity's natural "it's been good so far, why wouldn't it continue?" inclination...
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.
The possibility of that is why people aren't purchasing these large ships to wait for the price of steel to rise.
remember that this is the country with half the population of the United States that's essentially locked into a place like Louisiana that doesn't control its own River resources
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?
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.
No, that's not how it works.
Any vessel unable to withstand the extreme pressure will rupture, and then anything contained within it will move to the point dictated by its density.