[220814.EN.SEA] Ever-compliant Hapag-Lloyd Takes On Regulatory Costs Before It Must

LOSS-MAKING Hapag-Lloyd has decided to add costs by no longer selling vessels to shipbreakers that do not comply with strict United Nations regulations - even though the regulations are not in force.

The German carrier said it would only use scrap yards that have the International Organisation for Standardisation 14001 certification, and thereby taking work away from those who do the shipbreaking on the Indian subcontinent.

Hapag-Lloyd, which has a reputation for ahead-of-schedule compliance, now insists shipbreakers follow the UN's International Maritime Organisation's Hong Kong Convention for the Safe and Environmentally Sound Recycling of Ships.

So far only Norway, France and Congo have ratified the convention.

Not all recycling yards can afford these standards, notes Lloyd's List, adding that such a policy will limit Hapag-Lloyd's ability to benefit from the higher prices offered by breakers in India, Pakistan and Bangladesh.

But the report also noted that the Jiang Xiagang Changjiang Shiprecycling Yard near Ningbo does meet specifications at prices that are a third less than those located in the Indian subcontinent.

According to buyer GMS, Pakistan, Bangladesh and Indian yards are offering between US$445-$455 per ldt (light displacement ton) compared with Chinese yards which are offering $290 per ldt.

Pakistan and Bangladesh have continued to dominate demolition activity over the past week, but there are fears that deflated sentiment in India could drag rates down across the board.

Brokers said Indian buyers were struggling to maintain rates under pressure from a fluctuating currency and from cheap imports of Chinese steel making ship plate less competitive.

"It may well be some time before we see Indian buyers offering with the vigour and bullishness of the last quarter, with many predicting some further lows to come on the currency in the weeks ahead before any improvements are seen," said US-based cash buyer GMS.

Despite the gloomy outlook on the shipbreaking beach in Alang, an Indian buyer still managed to seal the top deal of recent days. There is ample demand and after months on sidelines, Indian buyers took the lion's share of the tonnage on offer.

Source : HKSG.