The UAE could become a force in the global ship scrapping industry as new regulations arrive.
Ship-breaker potential in UAE
When it comes to exploiting the coming boom in ship-breaking, the UAE is in the right place at the right time, according to Bob Hawke, the managing director of the Abu Dhabi-based marine contractors Khamis Al Rumaithy.
The company, which builds marinas and jetties, also has a track record in demolition - from fixed marine structures such as rigs to barges. It now envisages huge potential in expanding into the ship-recycling industry as cash-strapped shipowners are looking to scrap younger vessels this year.
Khamis Al Rumaithy envisions a facility that will be fully compliant with all the ecological requirements for a "green" recycling process.
"We are looking at a number of coastal free zone sites," said Mr Hawke. "What we need is water depth to build a quay and a large adjoining onshore site where we can remove and then break down the engines and separate any hazardous material for later removal. That leaves the hull still intact for fast breaking.
"Ships are 90 per cent steel. But what's left contains a lot of nasty material; PCBs, oil, asbestos, so you can't be cavalier."
The company has already secured unnamed Bahrain financial backers for the project, with connections to Abu Dhabi, and although its plan would be less financially attractive than the ship-breaking deals being offered by the market-leading yards in India and Bangladesh, Mr Hawke says they hold a trump card.
"All the big ship owners have signed up to some form of corporate responsibility, committing themselves to being seen to be acting in the environment's best interest," said Mr Hawke. "You might get a lot more money for a ship if you sell it to one of the yards in India or Bangladesh, but running a ship up on to a beach and then tearing it apart is not environmentally sound. And these days the world is watching."
Despite the added expense, offering environmentally friendly ship-breaking facilities has not cramped expansion for the Turkish or Chinese, who are world leaders in "green" compliant yards.
According to the Turkish Ship Recycling Association, which has 21 members, it is on target to recycle more than 1 million tonnes this year. Yet the sector is highly regulated by the government and all the yards must adhere to all the International Maritime Organization regulations on ship-breaking.
And in China, where the sector is also highly regulated, the market is so lucrative that last month the giant French conglomerate Veolia announced it was investing US$160 million (Dh587.6m) in a recycling facility capable of demolishing 800,000 tonnes of shipping, equivalent to 30 of the largest tankers, a year.
Last year, the UAE was the last port of call for more ships heading to the breakers' yard than any other country, according to a survey of the industry carried out by the shipping journal Lloyd's List. As a result, any new UAE industry, poised between Turkey and China, and on the doorstep of the eco-unfriendly subcontinent yards, could expect to corner up to 10 per cent of the global tonnage scrapped each year.
Last year, more than 40 million tonnes of ships were broken up, with scrap steel fetching $450 a tonne.
Big returns can be expected, says Mr Hawke. Industry watchers agree with his assessment.
"Cash-strapped ship owners will scrap younger and younger ships this year as the dry bulk market wallows in the doldrums," the United Kingdom's Drewry Maritime Researchstated in its latest report. A vessel as young as 15 years of age has already been sold for scrap in recent months, while the average scrapping age of Chinese-built bulk carriers was 21 years last year, it said.
Drewry does not expect an improvement in the freight market this year, predicting that the number of shipping companies getting into financial difficulty will only rise over the course of the year. "Demolitions in 2013 are expected to be more than what was seen in 2012, and the average scrapping age will fall even further as middle-aged vessels struggle to find employment," the report adds.
As well as cornering a substantial slice of the ship-recycling market, Mr Hawke believes a major facility in the UAE would generate business beyond the shipping industry.
"The steel industry in the region would be our natural customers," he said. "But because we would be well equipped to dispose of hazardous materials on an industrial scale, other industries who have issues in disposing of such waste, such as the aluminium and chemical industries, could become our customers, too."
As a result, such a facility would confer serious "green" credentials on the UAE Government, he said.
"Having such a card to play would ensure the UAE a seat at the top table wherever any environmental issues were being discussed," added Mr Hawke.
Last month the European Union voted in favour of rules to ensure European ships are recycled only in facilities that are safe for workers and environmentally sound.
Until now, most European-owned ships have ended up on the tidal beaches of South Asia. In 2009, more than 90 per cent of European ships were dismantled in ship recycling facilities in countries not members of the Organisation for Economic Cooperation and Development, which has environmental standards for ship-breaking.
Because 17 per cent of world tonnage is registered under an EU flag, the parliament says improving ship-dismantling practices worldwide is long overdue.
"This proposal aims to ensure that our old ships are recycled in a way that respects the health of workers as well as the environment," said the EU environment commissioner, Janez Potocnik. "It is a clear signal to invest urgently in upgrading recycling facilities."
The new regulations will include a list of ship recycling facilities that must meet a set of environmental and safety requirements to be included. European ships will be allowed to be recycled only in facilities on the list.