An owner has a ship which he cannot sell for continued trading, so he offers it on the demolition market. Usually the sale is handled by a broker. These brokers keep records of recent sales and, because they are “in the market”, they know who is buying at any point in time. When he receives instructions from the owner the broker circulates details of the ship, including its lightweight, location and availability to interested parties.
The ultimate buyers are demolition yards, most of which are located in the Far East (e.g. India, Pakistan, Bangladesh and China). However the buying is usually done by intermediares, buying the ships for cash and selling them on to demolition yards. Prices are determined by negotiation and depend on the availability of ships for scrap and the demand for scrap metal. In Asia much of the scrap is used in local markets where it provides a convenient supply of raw materials for mini-mills, or cold rolled for use in construction. Thus, demand depends on the state of the local steel market, though availability of scrapping facilities is sometimes a consideration.
The ships are sold at a negotiated price per light-weight ton. Thus prices can be very volatile, fluctuating from of $100/lwt in the 1980s to more than $400/lwt in 2007. The price also varies from ship to ship, depending on its suitability for scrapping. As offers are received, the price firms up and eventually a deal is made. Although a standard contract such a Norwegian Sales Form is sometimes used, so few of the clauses are relevant to a demolition sale that brokers tend to use their own simplified contract. On completion the purchaser takes delivery of the ship and, if he is an intermediary, makes the arrangements for delivering to the demolition yard.
Shipbreakers mainly rely on manual labour to dismantle ships in whatever facilities are available, often a suitable beach. Although it is possible to increase productivity by using mechanized shipbreaking methods, these are capital-intensive and the investment has not generally been thought economic, given the volatility and small margins in the shipbreaking business. The process of non-mechanized shipbreaking falls into three stages. At the preparatory stage, the owner of the vassel should undertake various operations uncluding stopping up all intake apertures; pumping out all bilge water; blocking off intakes and valves; and removing all non-metal objects together with potentially explosive materials. If the vessel is a tanker it must be cleared of potentially dangerous gases. This work is often subcontracted. The next stage is to beach the ship and remove large metal structures such masts, pipes, superstructure, desk equipment, main engine, ancillary equipment of machinery room, decks, platforms, transverse bulkheads, propeller shafts, propeller shaft bearings, upper hull sections, bow and stern end sections. The remainder of the ship is then hauled by whinches or lifted on to dry land by means of slipways, ramps or dry docks and cut into large sections. In some of the less sophisticated shipbreaking operations the vessel is simply winched on the beach. Although this process can be undertaken satisfactorily on a beach or alongside a quay. the availability of a dry dock is a considerable advantage in terms of efficiency, safety and control of spillages. Pumps, auxiliary engines and other equipment are removed and sold. Finally, the panels and sections obtained from the ship are cut into smaller pieces as required, using manually operated propane cutters. The scrap is then assembled for transport to its ultimate destination.