Few options for scrapping obsolete ships
by Thomas Peele (Knight Ridder Newspapers), Bradenton Herald
19 May 2006 (Walnut Creek, Calif.) –
There is nothing easy or cheap about getting rid of an old ship.
But it can bring millions in profits for the companies that take them.
When the price of recycled steel was low, the U.S. Maritime Administration tried to sell obsolete vessels but could find no buyers.
Now that foreign demand for steel is high, raising prices to $250 to $500 a ton, the administration is paying companies millions to dismantle and recycle ships.
The vessels range in size from the small World War II Victory ships at 7,607 gross tons to at least five ships of more than 37,000 gross tons.
A ship recycling expert estimated that scrapping a ship of that size would yield a profit of roughly $3.7 million.
The manager of the government's ship disposal program defended paying to have the ships recycled rather than selling them. It is imperative to move them when the market demand is high, said Curt J. Michanczyk.
That is when the agency can find companies willing to take on the dangerous scrapping jobs, he said.
There are no active scrapping yards on the West Coast, and the United States bans sending ships containing hazardous materials to other countries for disposal. That leaves scrapping yards on the Texas coast as the only option for administration vessels in Suisun Bay.
Former Maritime Administration head John Jamian said he would like to see foreign options explored despite congressional, EPA and environmentalist opposition.
"I am not saying we should do it, but it is something we should explore," Jamian said. "There are domestic capacity issues. Forced competition keeps the market moving."
The administration ended up in court when it tried to go overseas.
In 2003, it sent 13 ships from its Virginia fleet to a scrapper in Teesside, England. The Sierra Club and the Seattle-based Basel Action Network sued to block their scrapping. The matter is also being litigated in Great Britain.
"We are very worried that this case could open a floodgate," Richard Guiterrez of the Basel Action Network said. "The U.S. can't export toxic material. The Maritime Administration is gravely mistaken about this."
Environmentalists recently forced the abandonment of a Virginia company's proposal to recycle ships in Oregon, where they would have been hauled out of the water and cut apart on beaches. Oregon Gov. Ted Kulongoski said in February that he would only permit ship recycling in dry docks.
Two empty dry docks in the Bay Area could handle ship recycling, one on Mare Island in Vallejo and the other at the former Hunters Point Naval Shipyard in San Francisco where the Navy cut up three frigates in 2000 and 2001.
But even with their proximity to the Suisun fleet, strict environmental regulations, state toxic waste requirements and labor costs make those locations likely money losers, one expert said.
"We can't compete with Texas where they pay minimum wage," said Werner Hoyt, an engineer who has worked in the ship recycling industry.
"The guys in Brownsville can bid against us and absorb the cost in reduced labor" payrolls.
The Maritime Administration pays companies to recycle obsolete ships, with the scrap becoming the company's property. Steel, bronze and aluminum is recycled. It must dispose of thousands of tons of hazardous materials such as asbestos, PCBs and lead.
Still, with steel prices high, Hoyt estimated a company could gross millions from recycling large ships with "good profits" after labor and environmental expenses.
Recycling a ship of about 7,700 gross tons could yield a profit of roughly $3.7 million based on current steel and metal prices, according to an analysis by Raymond J. Lovett of the Ship Recycling Institute in Philadelphia.
That is about the tonnage of each of the four Victory-class ships the administration will soon send to Texas. It plans to pay a scrapping company $3.3 million to take the ships.
The total value of the recycled materials would be roughly $24.4 million. Expenses would total $9.6 million for a profit of roughly $14.8 million based on Lovett's analysis.
Once, the ships might have been recycled at Hunter's Point in San Francisco.
The time for ship recycling there has passed, even though it still has the West Coast's largest dry dock, said Saul Bloom, a member of the former base's citizens advisory committee and director of the San Francisco environmental group Arc Ecology.
"Not now, not with housing being built here," Bloom said.
Still, Hunter's Point could be the safest way to dispose of the Suisun fleet, said Lovett.
The ships would only need to be towed across San Francisco Bay, their steel could be loaded directly onto container ships for transport to Asian markets and California has strict rules to protect the environment.
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