Ship recycling a source of scrap and non-ferrous metals in the EU. Shipyards and steel mills lack a common strategy [ANALYSIS]

On May 19th, the European Parliament adopted a new EU steel import regime, introducing significant restrictions on the availability of imported steel to the European Union market. The situation became critical for some producers following the suspension of exports of iron, steel, and copper scrap via Ukraine. Shortages occurred at Polish steel mills. This is despite the EU being a scrap exporter.

This situation could negatively impact steel supplies and prices to European shipyards. Many operators involved in the purchase and marketing of scrap do not send it to EU steelworks but rather for export. Can the EU shipbuilding and steel industries share a common strategy?

A comprehensive ship recycling market in the EU would stabilize the system for the comprehensive recycling of steel and non-ferrous metals from ships built by European shipowners. Refurbished and modernized equipment could be introduced into the market. Currently, countries in Asia and Turkey are using this approach. However, the EU lacks a comprehensive concept for ship recycling as a component of a ship’s lifecycle management system. The lack of a comprehensive EU industrial strategy also translates into an inconsistent policy for the recovery of steel, secondary raw materials, and decommissioned ship equipment.

In a Steel Clinch

Problems with secondary raw materials and the health of the European Union’s steel industry have been ongoing for years. Therefore, on July 1st, the European Commission wants to protect the steel industry with administrative and tariff decisions. Duty-free quotas for non-EU steel are to be reduced by half. Importers will face additional punitive duties of up to 50% for exceeding import quotas. The intention is to “combat the negative impact of global overcapacity on the European steel industry,” as reported by Benjamin Steven of Eurometal.net.

The regulation on the protection of the EU steel industry was adopted with 606 votes in favor, 16 against, and 39 abstentions. It remains unclear whether the impact of protecting the interests of steel producers has been calculated. It has been assured that there will be no gap in the EU’s safeguard mechanisms for steel trade. The regulatory mechanism will have a maximum duration of eight years, in accordance with WTO rules.

The situation is further complicated by the various free trade agreements (FTAs) concluded by the EU, which cover the majority of steel imports into the European market. The regulation concerns tariff increases and quota restrictions for all partners participating in the steel trade, including suppliers to the shipbuilding industry. This will apply regardless of FTA status, although FTA partners will likely receive higher quantitative allocations within their respective quotas than WTO countries that are not FTA members, explains Steven.

Steel Exceptions

Market protection, of course, has exceptions. A joint statement by the European Commission, Council, and Parliament was adopted alongside the regulation, clarifying that the existing sanctions exemptions for Russian steel plates will remain in force until the end of September 2028. The new import regime explicitly prevents the opening of quotas for sanctioned countries, including Russia.

However, semi-finished steel products, including plates, are not covered by the regulation, and therefore their access to the single market remains unchanged since July, according to the European Commission’s explanation to the European Parliament.

This was clarified by the rapporteur for the draft regulation, Karin Karlsbro, Vice-Chair of the Parliament’s Committee on International Trade. She stated that the EU authorities had reached an agreement to “completely end” imports of Russian steel. Non-tariff measures were deemed the best option. In her opinion, blocking supplies from Russia is the “easiest target” in the fight to protect EU production capacity.

However, it is unclear how the declaration or the broader regulation will in any way adjust the current treatment of steel sheet imports from Russia. The current timeline for phasing out trade with Russia remains unchanged, despite industry calls for an earlier ban on this exemption, comments a Eurometal.net journalist.

EU a Scrap Exporter

While defending steel production, European Union countries are also significant exporters of scrap. In 2024, EU companies specializing in ferrous scrap exported 16.72 million tons, reports Vadim Kolisnichenko of GMK Center. GMK Center, based on Eurostat data, determined that over 60% of total exports went to Turkey. 10.62 million tons of scrap were exported from the EU to this country. It’s worth noting that Turkey is also a strong global hub for scrap yard operations.

The Polish ferrous scrap market has been undergoing significant changes and growth in recent years. In 2024, exports of the raw material increased by 5.9% compared to 2023, reaching a record level of 2.81 million tons. Simultaneously, imports increased by 2.3% year-on-year, reaching 956,000 tons. tons – reports Vadim Kolisnichenko from GMK Center.

Scrap exports from Poland have undergone significant changes since 2022. In particular, the geography of supplies has changed. While in 2015-2022, scrap deliveries from Poland to third countries accounted for approximately 26% of total exports, in 2023-2024 this figure increased to 47.8%.

Significant recipients of EU scrap were the steel industries of Egypt (1.68 million tons), India (1.09 million), and Pakistan (654.34 thousand tons). These countries, along with Turkey, account for 84% of EU scrap exports. In December 2024 alone, the EU exported 1.36 million tons of ferrous scrap, a decrease of 14.4% compared to December 2023 and a decrease of 20% month-on-month.

In November, 955.3 thousand tons of scrap were shipped to Turkish customers (-6.1% y/y; -17.7% m/m), 119.59 thousand tons to Indian customers (-35.7% y/y, -9.8% m/m), 95.25 thousand tons to Egypt (+20% y/y, -43.8% m/m), and 74.14 thousand tons to Pakistan (-10.3% y/y, +19.9% ​​m/m), GMK Center reports. Even Poland imports scrap from the EU market (265 thousand tons in 2024).

Bahrain – a new player in ship recycling

And good steel from European ships is being sent to scrap yards in Asia and Turkey. A new shipyard has recently joined. Priya Blue Group, one of Asia’s largest ship scrapping operators, has added the Arab Shipbuilding & Repair Yard (ASRY) to its network. This has launched the largest ship scrapping yard in the Middle East.

The Bahrain-based shipyard and the Indian Priya Blue Group formed a joint venture in May of this year, creating a “world-class facility” for compliant and environmentally friendly recycling, Priya Blue Group management announced in a press release. The Indian shipyard operator will utilize the ASRY shipyard’s infrastructure to recycle the largest ships.

ASRY shipyard workers will be able to dismantle ships and recover steel and other metals thanks to the use of a dry dock and slipway. The yard’s equipment will enable the dismantling of large ships up to ULCC size, as well as the recycling of drilling rigs and offshore structures directly on the quayside.

The newly established joint venture emphasizes that, in addition to conventional vessels, it can also recycle vessels operating in the offshore market. The shipyard is equipped to recover secondary raw materials from floating production, storage, and transshipment vessels, drilling platforms, and offshore structures. The shipyard will receive strong support from Best Oasis, a company with years of experience in the professional acquisition of ships and floating structures for shipbreaking yards.

Jet is an affiliate of the Priya Blue Group. Best Oasis purchases ships for cash, assists in acquiring tonnage, and commercially manages ships destined for scrap, including reflagging and re-ownership. This company will be the main partner facilitating the acquisition of ships for the shipbreaking yard in Bahrain.

Recycling in a Duty-Free Zone

A significant advantage of the shipyard is that ASRY operates in a duty-free zone, while also offering basic services that also benefit from customs exemptions. Services are provided duty-free, the shipyard management stated, emphasizing government support for its business activities.

Customs is on-site and “connected to the government network and processing documents without delays,” emphasizes shipyard management. Bahraini trade regulations also simplify the import of parts and labor, allowing ASRY to launch projects faster than regional competitors. European shipyards can only dream of such an approach to shipbuilding.

“The partnership with Priya Blue aims to bring best practices in ship recycling to the Kingdom of Bahrain and represents a strategic extension of ASRY’s journey and evolution,” said Dr. Ahmed Al Abri, CEO of Arab Shipbuilding and Repair Yard Company (ASRY), as quoted by TradeWinds.

This is the first time an Indian shipbreaking yard operator has expanded operations outside South Asia. Priya Blue CEO Sanjay Mehta told TradeWinds: “We have recycled over a hundred complex ships at Alang. We know what compliant, responsible ship recycling looks like—and what it takes to consistently achieve it. Bahrain is not an experiment.” “This is a deliberate expansion of a proven operation,” emphasizes the CEO of Priya Blue Group. The Indian company will develop integrated solutions for its Bahraini partner, encompassing recycling operations, safety standards, and environmental management. Priya Blue will provide compliance documentation and hazardous waste management. Procedures for utilizing the dry dock, slipway, and heavy-lifting infrastructure for recycling will be developed. Indian shipbuilders will also provide regulatory support in Bahrain.

ASRY already holds licenses for the recycling of ships containing hazardous materials. This includes the handling, storage, processing, export, and disposal of naturally occurring radioactive waste, which is a key challenge in offshore structure recycling.

The shipyard made its first significant foray into the ship recycling market in early 2023, when it completed work for Wan Hai Lines. The work was carried out in accordance with the principles of the Hong Kong International Convention for the Safe and Environmentally Sound Recycling of Ships and European Union ship recycling regulations. Shipyards in the European Union are still struggling to implement the recommendations of EU regulations on a large scale and at an appropriate level of profitability. Perhaps if they joined forces, they could achieve this. the steel and shipbuilding industry would be able to stop the outflow of high-quality materials from which ships are built outside the European Union.

Fot.: Depositphotos