Maersk Line Enters Deals to Recycle Eight Vessels
In November, Maersk Line selected five ship recycling facilities in China and India for a tender to recycle eight panamax vessels. All ship recyclers agreed to the A.P. Moller – Maersk Responsible Ship Recycling Standard (RSRS) as a prerequisite to enter the tender.
Panamax container vessels—in the range of around 4,000 TEU—are becoming increasingly obsolete thanks to the expansion of the Panama Canal. The new Panama Canal locks can accommodate containerships as big as 14,000 TEU.
Maersk’s ship scapping practices became the subject of some controversy earlier this year after the carrier 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 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 bowed to critcism and agreed to enforce international standards.
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.
“These vessels represent roughly one percent of our fleet, so this is a small but meaningful capacity reduction, which will contribute to achieving a better balance between supply and demand for Maersk Line” said Maersk Line COO Søren Toft.
In the coming years, Maersk Line expects to recycle a larger number of vessels than in previous years as more vessels are coming to their economical end of life. With Maersk Line’s fleet of more than 600 vessels, owned and chartered, any decision to recycle depends on a broad set of variables, including the state of the market. Maersk also reviews the market development in relation to operational factors such as the vessels’ fuel efficiency, running and maintenance costs.
“The cost of replacing the vessel also impacts our considerations as to whether to recycle a vessel,” said Peter Lund, head of chartering at Maersk Line. “external factors such as steel price developments and global or regional trade outlooks play a role in our decision making process.”
The decision to scrap the eight vessels was in part driven by an ambition to enhance flexibility in the 4,000to 5,999 TEU network, where 60 to 65 percent of the total Maersk Line fleet is owned. Deals for the vessels were struck in early December with two ship recyclers in India and one in China.
In India, four vessels will be recycled by Shree Ram and Y.S. Investments. Shree Ram is currently recycling two Maersk Line vessels.
Recycling supervision will be carried out by Maersk superintendents and external consultants to ensure responsible ship recycling operations.
The remaining four vessels will be recycled at Jiangyin Xiagang Changjiang Ship Recycling in China, a Lloyd’s Register certified facility, which has agreed in full to comply with the A.P. Moller – Maersk RSRS. Here, supervision will be carried out by Sea2Cradle, an external company.