Literature review ; Economics flow in Ship Demolition
Activity
J Raharjoi
Marine Engineering Departement, Sepuluh Nopember Institute of Technology Surabaya
Introduction
Rapid development in the maritime industry
became major factor in ship demolition.
archipelagic country such as Indonesia has it’s
own interest in the ship demolition industry. It is
important process to balancing fleet capacity in
the shipping industry as well in effect of ship
obsolence, technical development and
environmental regulation on ship
demolition(Buxton, 1991). Influence in freight
market level and the introduction of more
efficient ships were strongly affect ships owner.
Operational cost in bunkering of obsolete ship as
well cost to repair became a major factor to
decide in scapping(Yin and Fan, 2018). Scrap
value of the ship is amount of the retrieved
materials within the ship and demolition cost. The
steel retrieved in the demolition process can be
supplied to the steel industry, Hence the steel
industry is essential in ship demolition
industry(Merikas, Merika and Sharma, 2015).
Summary
Figure 1 role of scrapping in the supply/demand
balance(Buxton, 1991)
Ship demolition industry with assumption of
average ship life of 25 years has amount of 4% of
the existing fleet as should new building demand.
It has relationship as figured in Figure 1 role of
scrapping in the supply/demand balance(Buxton,
1991).
Knapp et al. (2008) applied econometric
modeling to test the relationships hypothesized
by Mikelis (2007). The results suggest a negative
relationship between a ship's earning and the
probability of demolition for all locations and a
positive relationship between scrap prices and the
probability of demolition for all locations. It also
discussed the impact of various factors, including
vessel characteristics, economic conditions of the
shipping market and safety inspections on the
probability of demolition for all five demolition
locations. (Kagkarakis, Merikas and Merika,
2016) further evaluated the predictive power of
their model. The findings of their study revealed
that, in the short run, the two series react to new
information with a time lag. This is consistent
with the fact that steel-scrap imports in the ship-
demolition areas are considerably higher than the
volume of scrap-metal obtained from ship-
recycling. In particular, there is a 4-month lag
between the formation of the steel-scrap pricing
in the developed exporting countries and the price
determination in the ship-demolition market,
which is attributed to the considerable time frame
needed to transport the steel-scrap commodity to
Asia.
The sale of a ship for dismantling can be the result
of a direct deal between the demolition yard and
the shipowner(Karlis and Polemis, 2016).
However it is more common to be made through
a Cash Buyer. Shipbreaking yards usually offer a
small deposit and a bank letter of credit of
between 60-180 days (Mideast-shipping.com,
2016). The ship- owner would prefer cash
payments. Because of that most deals are made
through Cash Buyers. Cash buyers act as
intermediates between the shipowner and the
scrap yard (Journal, 2013)
Figure 2 demolition prices determined(Merikas,
Merika and Sharma, 2015)
Major interest for the three parties involved in the
demolition market (Ship Recyclers, Ship-
owners, and Cash buyers), are determined by the
demand and supply as shown in the Figure 2
demolition prices determined(Merikas, Merika
and Sharma, 2015); however we shall be
exploring the possibility that the equilibrium
price achieved through the interaction of demand
and supply is not the signal to which the three
parties respond. The signal is the scrap prices to
which demand and supply respond, and thereafter
the price is formed, i.e. the equilibrium price is
the result to this signal.
Figure 3 ship breaking process(Gregson, 2011)
Besides its interest in economical aspect, ship
demolition industry also has its own problem, in
terms of human health that became concern in this
industry. Because the demolition assemblage
works to transform the immutable mobile to a
mutable materiality, recovering materials and
stabilising them for future use whilst casting other
materials as wastes. The fumes and smoke, as
well as animated materials, that are realised
through ship breaking as an intervention in the
world conjoin and co-mingle with human bodies
as agential possibilities in an open process of
mattering.(Gregson, 2011)
Conclusion
with this summary, author agree that ship
recycling industry will grow and became another
market in Indonesia. Ship’s that going into this
industry will always supplied every years because
of that factor that already explained earlier.
Economical flow in this industry is a part of micro
economic in maritime. Author has similar
concern with (Gregson, 2011) in the terms of
health, what should not be neglected is the
backward look of progress. For the sake of
sustainable global economy and green industry,
human health have to withstand the risk. With this
review, author hope for futher research in terms
of health will be conducted. To ensure the safety
in human health and sustainable industry.
References :
Buxton, I. L. (1991) ‘The market for ship demolition’, Maritime Policy and Management, 18(2), pp. 105–
112. doi: 10.1080/03088839100000034.
Gregson, N. (2011) ‘Performativity, corporeality and the politics of ship disposal’, Journal of Cultural
Economy, 4(2), pp. 138–146. doi: 10.1080/17530350.2011.563067.
Journal, O. (2013) ‘Regulation on ship recycling’, 3(6).
Kagkarakis, N. D., Merikas, A. G. and Merika, A. (2016) ‘Modelling and forecasting the demolition
market in shipping’, Maritime Policy and Management, 43(8), pp. 1021–1035. doi:
10.1080/03088839.2016.1185181.
Karlis, T. and Polemis, D. (2016) ‘Ship demolition activity : A monetary flow process approach’, 30, pp.
128–132.
Merikas, A. G., Merika, A. and Sharma, A. (2015) ‘Exploring Price Formation in the Global Ship
Demolition Market GMS-Cash Buyer of Ships for Recycling’, 2015, p. 18.
Yin, J. and Fan, L. (2018) ‘Survival analysis of the world ship demolition market’, Transport Policy.
Elsevier Ltd, 63(November 2017), pp. 141–156. doi: 10.1016/j.tranpol.2017.12.019.

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