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International Trade: Where do the ships sent to unsafe breaking yards come from?

The beaches of Alang in India and Gadani in Pakistan are major worldwide centres of the ship breaking industry. Together with Chittagong in Bangladesh, these breaking yards are also notorious for poor working conditions, health and safety issues and environmental concerns. In June 2014 for example, five people were killed and at least ten were injured following an explosion in a chemical tanker that was being salvaged and scrapped in Alang. The explosion was triggered by a suspected gas leak. With the nearest hospital 50km away in Bhavnagar, there are difficulties with obtaining urgent treatment for serious injuries that occur in Alang.

According to the NGO, Shipbreaking Platform, ship-breaking companies employ unskilled workers to break down the ships manually. This exposes them to toxics such as asbestos, lead, PCBs, waste oils and heavy metals as well as creating an environment ripe for injuries due to a lack of heavy lifting equipment. The Basel Convention is designed to prevent OECD nations from moving ships for breaking that contain hazardous materials, to non-OECD nations. This is because many non-OECD nations (such as India and Pakistan) are deemed to be using unsafe and environmentally unsound practices. According to the National Human Rights Commission in India however, “most of the ships which are brought to [Alang] may contain large quantities of gas, arsenic and other hazardous materials that can cause severe damage to mankind as well as the environment around”.

Given these issues, it is therefore interesting to ascertain which countries are sending vessels for dismantling to India and Pakistan. Using statistics from the International Trade Centre and the Circos visualization platform, the top ten countries supplying ‘vessels and other floating structures for breaking up’ to India and Pakistan are shown below in terms of quantity in tons. Figure 1 shows that the bulk of the major suppliers to India in 2013 were highly developed OECD nations, with South Korea and Japan being the leading countries, as well as substantial tonnage arriving from Europe. Japan for example, supplied just over 1.3m tons for dismantling out of the total 3.2m tons arriving in India from the top ten suppliers.

Figure 1: Top ten countries exporting vessels and other floating structures for breaking up to India, 2013

Figure 1: Top ten countries exporting vessels and other floating structures for breaking up to India, 2013

The story is similar for Pakistan in Figure 2, with South Korea and Japan again being the dominant suppliers in 2013. Here, of the approximately 2.2m tons supplied by the top ten countries, just over 1.6m tons arrived from OECD nations

Figure 2: Top ten countries exporting vessels and other floating structures for breaking up to Pakistan, 2013.

Figure 2: Top ten countries exporting vessels and other floating structures for breaking up to Pakistan, 2013.

 

MarketLine industry research indicates that the global marine freight industry generated total revenues of $427.8bn in 2013, representing a compound annual growth rate (CAGR) of 4.7% between 2009 and 2013. The performance of the industry is forecast to accelerate, with an anticipated CAGR of 4.9% for the five-year period 2013 – 2018, which is expected to drive the industry to a value of $544.0bn by the end of 2018. The number of ships arriving to these breaking yards is therefore unlikely to diminish in the near future.

In order for India and Pakistan to maintain a competitive advantage in the ship dismantling industry, they appear to be having to provide low cost labour, weaker environmental protection and limited health and safety regulations. There are therefore many parallels with the industrial revolution that took place in Europe in the 18th and 19th centuries, where poor working conditions were commonplace. On the basis of the ship breaking industry, these developing nations do not appear to have found a more equitable way of driving industrial growth. On the other hand, services industries have been a strong sector in India where working conditions and environmental concerns are likely to be more positive. The MarketLine IT Services industry profile for India indicates that this industry should grow at a CAGR of 14.8% over the 2013 to 2018 period.

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