Like many other industries in Pakistan today, which heavily rely on imports, the shipbreaking or ship-recycling sector also faces operational and financial challenges, leading to various detrimental effects on the national economy, such as unemployment, reduced profitability, lower revenues, and industry regression, among others. Against the backdrop of declining foreign reserves, banks have refrained from establishing letters of credit for importing decommissioned vessels for scrapping for over a year. Several other factors, both domestic and global, have contributed to the lowest turnover at Gadani’s ship breaking yards in over a decade.
Like many other industries in Pakistan today, which heavily rely on imports, the shipbreaking or ship-recycling sector also faces operational and financial challenges, leading to various detrimental effects on the national economy, such as unemployment, reduced profitability, lower revenues, and industry regression, among others. Against the backdrop of declining foreign reserves, banks have refrained from establishing letters of credit for importing decommissioned vessels for scrapping for over a year. Several other factors, both domestic and global, have contributed to the lowest turnover at Gadani’s ship breaking yards in over a decade.
The global shipbreaking market, with a size exceeding one billion dollars, has encountered challenging years due to the COVID-19 pandemic, an overall economic downturn, and the ongoing Russia-Ukraine conflict. The supply of vessels for scrapping from various sources has been sluggish, impacting the prices of old ships. These prices surged from an average of $364 per Light Displacement Tonnage (LDT) in 2021 to $530 and $544 for tankers and containers in 2022-23. The price factor has led to reduced purchases by shipbreaking countries, particularly Pakistan, which has experienced a significant devaluation of the Pakistani Rupee. Globally, in 2022, 443 vessels were sold for scrapping, with 292 of them ending up in South Asian countries.
During the first quarter of the current year (January-March 2023), only 102 ships of various types were dismantled across the world, amounting to a combined 3.19 million LDT. Out of these, India scrapped 37 ships, Bangladesh 35 ships and Pakistan 6 ships. Interestingly, the shipbreaking business in China has sharply declined, with no ships scrapped during the period under review. Meanwhile, Turkey demolished 6 ships, and the remainder were scrapped in European and other countries. Generally, the long list of decommissioned vessels includes general cargo ships, container ships, bulk carriers, oil tankers, chemical tankers, liquefied gas carriers, passenger vessels, and ferries, among others.
On a global scale, Pakistan is now the third-largest shipbreaking country in terms of scrapped tonnage and the number of ships dismantled annually. In 2022, Pakistan accounted for 16.6 percent of global shipbreaking activity. Gadani shipbreaking yards dismantled 43 ships with a cumulative tonnage of 1.3 million LDT in 2022, and 119 ships with a total tonnage of 3.0 million in 2021, and 99 ships with 2.3 million tons in 2020. Historically, the highest number of ships dismantled at Gadani was 141, totalling 6.0 million tons, in 2016. Pakistan’s shipbreaking industry, which dates back to the 1960s, was the world’s top shipbreaking destination until the 1980s but lost its competitive edge primarily due to improper policies of subsequent governments, ceding ground to Bangladesh.
Gadani, located along a 10-kilometer beachfront in Lasbela district, Balochistan, comprises a total of 335 plots, all owned by the Balochistan Development Authority. Among these, 135 are registered shipbreaking yards, with 34 operated by the government and the remaining 101 by private companies or individuals. Many of these yards have not been operational for years or have experienced minimal levels of recycled tonnage. Ship-recycling activities have nearly ground to a halt in recent years, with only seven shipbreaking yards currently in operation, compared to 130 in 2000, due to a limited supply of ships for scrapping. The remaining yards are temporarily closed. Presently, Gadani employs only about a hundred direct workers, a significant decline from the peak of over 30,000 employees in previous years. However, the situation is slowly improving, as evidenced by the beaching of four ships in August, which will provide work for the labour force.
In general, shipbreaking yields recycled metals like steel, copper, and aluminium, depending on the type of vessel. Additionally, valuable items such as steel pipes, valves, electrical cables (copper wiring), engines, batteries, generators, electrical and electronic appliances, glass, and furniture are recovered and recycled. The iron and steel scrap generated at Gadani by dismantling an average of six to eight small and medium-sized vessels is estimated to be between 1.2 to 1.5 million tons annually. This scrap meets approximately 20 percent of the domestic steel rerolling mills’ requirements that would otherwise need to be imported. Currently, Pakistan imports iron and steel scrap valued at over $600 million annually.
Shipbreaking is considered a hazardous industry and a dangerous occupation worldwide. In Pakistan, thousands of labourers from various provinces work in perilous conditions, handling hazardous materials and waste, such as heavy metals, residual oils, toxic paints, asbestos, and chemicals. Gadani shipbreaking yards are ill-equipped to handle fire hazards and other accidents. Demolition crews are often forced to work manually, with inadequate access to Personal Protective Equipment (PPE) like protective clothing, helmets, goggles, and other safety gear. There is no established system for toxic waste disposal, and the absence of hospitals, dispensaries, or ambulances is a concerning issue despite the prevalence of occupational diseases.
Workers, despite long hours, often do not receive overtime pay, nor do they have access to weekly, monthly, or annual holidays, pension plans, medical facilities, insurance, or compensation in case of accidents. They are not registered with social security institutions, leaving them without legal protection. Thousands of workers, some with their families, endure miserable and inhumane living conditions, exposed to environmental hazards. There is a lack of housing colonies, and these workers reside in makeshift shelters devoid of basic amenities like gas, electricity, sewage systems, pathways, and clean drinking water. Understandably, there are no schools for their children. Despite being a highly profitable business that contributes billions of rupees annually to the national economy, the government imposes heavy taxes on shipbreaking without making significant investments in its development.
According to the latest forecast for the global shipbreaking market, the industry is expected to grow considerably between 2023 and 2031---from $1.1 billion in 2022 to $3.1 billion in 2031. To secure and maintain a reasonable share of the world market, Pakistan must adopt effective strategies for modernizing and developing infrastructure, in line with international and regional trends and standards, over the medium to long term. The foremost priority is the ratification of the International Maritime Organization (IMO)’s Hong Kong International Convention for Safe and Environmentally Sound Recycling of Ships, which will be enforced in June 2025. India and Bangladesh, among other countries, have already ratified this convention, which primarily focuses on improving working conditions and implementing safety standards and measures.
Currently, almost two-thirds of decommissioned ships are dismantled using the obsolete and dangerous Beaching method, where vessels are dismantled directly on the shore. All South Asian countries, including Pakistan, follow this Beaching technology, which is considered the worst industrial practice, though cost-effective. However, the world is moving towards alternative and better technologies, such as Dry Dock, for recycling on stable and contained platforms in a controlled and efficient manner, by 2030. In the future, ships for recycling will only be allowed at facilities approved by the European Union. Pakistan must prepare for a progressive transition to Dry Dock technology to remain competitive in the industry. Therefore, it is imperative for the government to formulate a national shipbreaking policy as a top priority. It’s worth noting that a Jubail-based company reportedly plans to establish a modern, environmentally friendly ship recycling facility in Saudi Arabia, which could pose a challenge for the Pakistani shipbreaking industry.
The writer is retired chairman of State Engineering Corporation
