Demolition Market

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...