This will mean that Bangladesh, India, China and Pakistan, which have the biggest ship breaking yards in the world, will have a problem of plenty -- they do not have enough space for breaking around 100 ships.
Another outcome is that shipping freight rates may go up marginally across the globe because of the sudden reduction in capacity. The ships that will have to be scrapped account for 5.5 million dead weight tonnes of a total capacity of 322 million dwt.
The mandatory phasing out of Category II and III tankers will lead to a glut in the rerolling steel market. This, in turn, may pull down prices of rerolling steel.
In addition, the move will free nearly 2,700 employees across the globe, bringing relief to the acute shortage of people in the industry.
Industry sources say though the IMO ruling was handed down a few years ago, ship operators did not send their old tankers to ship breaking yards because freight rates had been ruling high for the last few years.
"Shipowners, knowing
Sources said only around 0.5 million dwt had been scrapped so far this year (till March 18) because of high freight rates. Of this, tankers with a capacity of 0.3 million dwt were sent to ship breaking yards in India.
The figures for China, Bangladesh, and Pakistan are 0.1 million dwt, 1.4 million dwt and 0.1 million dwt, respectively.
Indian shipping industry sources said few Indian ships were sent for breaking because most had already been replaced. "Since the IMO announcement was done a few years ago, we had already prepared ourselves by replacing old ships," a source added.
Apart from the business implications, the phasing out of old ships will help prevent the pollution of ocean waters.
In the yard
Who benefits: Bangladesh, India, China and Pakistan, which have the biggest ship breaking yards in the world
Side effects:
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Shipping freight rates may go up marginally because of the sudden reduction in capacity
- Rerolling steel market may be hit as prices will fall because of the glut in scrap
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