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  October 21st, 2016 | Written by

Maersk Defends Use of Dangerous Scrapping Yards—Then Scraps Plan to Use Them

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  • Carriers are increasingly scrapping ships to remove capacity and boost freight rates.
  • Demand for recycled steel is increasing globally.
  • Maersk is fetching good prices for steel at South Asian scrapping yards.

Maersk responded to criticism of its use of controversial Indian and Bangladeshi scrapping yards by stating it is encouraging an improvement in their conditions.

But days later, the world’s largest ocean carrier earlier said it would stop selling decommissioned ships and take of theri disposal by itself.

Maersk earlier confirmed its use of dangerous ship scrapping yards in India and Bangladesh to take advantage of the low labor costs and high steel prices. Maersk also acknowledged it used the Shree Ram shipyard in India at for two vessels as recently as this summer.

Maersk admitted that its standards were not being complied with in the shipyards at issue which lack of safety measures, have exposed gas cables and no ventilation, and endanger the environmental with shrapnel being discarded and chemicals not being disposed of properly.

But then a company spokesperson wrote on a company blog that “we have chosen to engage directly where the majority of ships are dismantled.”

Shipbreaking has become increasingly commonplace at carriers seek to remove capacity from bloated trade lanes where freight rates have collapsed. At the same time, demand for recycled steel is increasing globally, and the carrier can fetch good prices at the South Asian scrapping yards.

“The dismantling and recycling of a ship are recognized as part of the value of the ship,” wrote Annette Stube, head of Maersk Group Sustainability. “The majority of the world’s vessels are sent for recycling where the highest possible price for the steel can be attained. This is in shipyards on the beaches of India, Bangladesh and Pakistan.”

Stube admitted the ships are typically dismantled under poor working and environmental conditions in those locations and that “lower standards mean lower costs.” But they have appeared to have cornered the market on ship scrapping—in 2015, 74 percent of the world’s ships were dismantled on these beaches.

The UN’s Hong Kong Convention, which was negotiated in the International Maritime Organization (IMO) in 2009, and sets global minimum standards for safety and the environment, could resolve at least some of these issues. The problem is that the treaty has yet to be ratified and come into force.

“The answer is on the beaches of India, Bangladesh and Pakistan,” wrote Stube.

Maersk has requested a number of improvements to the yards and provides a financial incentives to upgrade work and environmental conditions, according to Stube.

But recent reports indicates that Maersk has changed its policy and will no longer be selling its old ships to the South Asian scrapping operations. Cargo vessels generally have a useful life of 25 to 30 years.

“When we decided to collaborate with shipyards in India we were fully aware of the risk of being criticized for the yards not yet fully observing the rules,” wrote Stube.

Apparently the fallout from that policy raised the heat to a level that Maersk could no longer bear.