Breaking Bad

The Shame of Germany's Ship Owners

  • Why it matters

    Why it matters

    Germany may have a reputation for being environmentally friendly, yet the counrty has been singled out for the reckless way its ship owners dispose of older vessels.

  • Facts

    Facts

    • German companies dominate the NGO Shipbreaking Platform list of the worst offenders in dumping old ships.
    • South Asian shipbreakers, which account for nearly 80 percent of the market, are notorious for their poor safety and environmental standards.
    • Of the 100 German-owned ships sold for scrap last year, 98 ended up on the beaches of South Asia.  Only Greece had more ships dismantled there with 104 vessels.
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    Audio

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Ship breaking factory, India
A beach which is also a shipbreaking factory in India. Source: Getty Images

The dumping blacklist, compiled by the NGO Shipbreaking Platform, reads like a pork dinner gathering of the Hamburg Shipbrokers’ Association. Rickmers, the charter company, is on the list. So too are its competitors: Peter Döhle, which manages hundreds of ships, and the venerable F. Laeisz, established in 1824. And topping the list is Hansa Treuhand, whose CEO Hermann Ebel is struggling to keep the troubled firm afloat.

Only this time there’s something more unappetizing on the table than crispy pork knuckles. The list names and shames companies that have their end-of-life ships broken up on beaches in Bangladesh, India and Pakistan. The German ship owners were responsible for the “worst shipbreaking practices among all shipping nations,” according to Shipbreaking Platform.

Until now, this has been a taboo topic in Hamburg shipping offices, and for good reason. South Asian beaching yards are notorious for eschewing environmental and safety standards and abusing worker rights. Oil and toxic chemicals seep into the sea. Laborers are exposed to asbestos. Many die in accidents.

22 p23 Ship Scrapping-01

It’s enough to spoil even the heartiest of appetites. The behavior of German shipping companies has become so bad that the United Nations has had to step in. Baskut Tuncak, the UN’s special rapporteur on hazardous substances and wastes, handed the German government an official note complaining about the practices.

Of the 100 German-owned ships sold for scrap last year, 98 ended up on the beaches of South Asia. Only Greece had more ships dismantled there with 104 vessels, though Germany is the worst offender when the size of its fleet is taken into account.

The inglorious end to once glorious ships is symbolic of the German shipping industry, and to be sure, the industry as a whole.

To give German owners their place in the sun on the world’s oceans, the German government introduced a so-called “tonnage tax” in 1998. It wasn’t so much of a tax but rather a subsidy to invest in deep sea freighters. For a time the German fleet of some 3,750 ships ranked third in the world, with a total value of $42 billion. To this day Germany remains the market leader in container shipping.

Nobody in Hamburg wanted to hear how this influx of money, boosted by favorable loans from state-backed banks like NordLB, HSH or Commerzbank, would eventually lead to the industry being crippled by massive overcapacity. But that’s exactly what happened.

Today, the global shipping industry is in a crisis. In early January, 351 container vessels were laid up in ports, representing 7 percent of ocean container capacity worldwide.

While shipbuilders around the world currently have orders on their books for vessels with a total shipping capacity of 3.3 million standard containers (around 17 percent of global capacity), the scrapping business at the other end of the supply chain is also running hot. Shipbreakers notched up a record 862 vessels, some less than 10 years old, in 2016.

South Asian shipbreakers account for nearly 80 percent of the market. The ships are stripped down and their parts – metal, pipes, machines – resold. The demand forces laborers to work quickly, with often disastrous results.

The behavior of German shipping companies has become so bad that the United Nations has had to step in.

Shipbreaking Platform, which liaises with the European Commission, highlighted several fatal accidents in just five weeks around the southeastern Bangladeshi port of Chittagong, where 145 shipbreaking firms and 15,000 workers share a 15-kilometer stretch of beach.

In one case, a 21-year-old man died when he fell from a height while working for the company Seiko Steel. He wasn’t wearing any safety equipment or protective clothing. Just six days later, five workers from the same company were hit by falling steel plates during the dismantling of a German vessel. Two of the men died; the other three were severely injured.

The accidents continued. One worker was crushed by steel plates at the Lashkar Shipbreaking yard. Another was killed when a cylinder exploded at the Bhatiary Steel yard, while his colleague suffered severe burns to his face and upper body. And a 28-year-old was fatally run over at Kabir Steel. When his grieving relatives turned up to protest, they were allegedly shot at by the firm’s security guards.

The German ship owners argue they cannot get their vessels scrapped elsewhere because of a lack of shipbreaking capacity in developed countries. “We don’t know any demolition yards in central Europe,” said Bertram Rickmers, owner of the Rickmers group.

Other companies, such as Dr. Peters, point out that their ships were “all sold to trading buyers in Asia.” These buyers, such as GMS and Wirana, are effectively middlemen, taking charge of the final sailing and transferring the vessel to a flag of convenience from countries like Tuvalu, the Comoros Islands or St. Kitts and Nevis, a way to circumvent the rules. They even paint over the name of the ship to protect the previous owner’s modesty.

“It borders on a scandal that only a few states have signed up to the Hong Kong Convention so far.”

Ralf Nagel, head of the German Shipowners' Association

The general rule of thumb is: the laxer the regulations, the bigger the profit. Anyone who, like Hamburg Süd, opts for a dismantling in Turkey will get up to two million euros less per ship than they would if their vessels were beached in South Asia.

The German Shipowners’ Association (VDR) blames the many bankruptcies in the industry as the reason why so many German ships end up in these grim South Asian graveyards. “Many insolvency liquidators are duty bound to achieve the highest proceeds for their creditors, or they could risk being made liable,” a spokesman said.

The Hong Kong Convention, adopted by the UN in 2009, declares that ships shouldn’t pose any unnecessary risk to human health, safety and the environment when they reach the end of their operation lives. But it still hasn’t been ratified by the major seafaring countries, including Germany.

That almost makes Ralf Nagel, the head of the VDR, speechless. “It borders on a scandal that only a few states have signed up to the Hong Kong Convention so far,” he said.

Behind the lack of ratification lie hard-nosed business interests. Shipbreaking Platform wants vessels to be dismantled in European yards. So far, the European Commission’s list of approved yards only covers those in the E.U.

But some see something else driving these demands: an economic program for impoverished European coastal regions.

 

Christoph Schlautmann covers the logistics and waste management sectors for Handelsblatt. To contact the author: schlautmann@handelsblatt.com

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