Examination of Witnesses (Questions 40-59)
30 JUNE 2004
MR MARK
BROWNRIGG, MR
EDMUND BROOKES,
CAPTAIN NIGEL
PALMER AND
MR TOM
PETER BLANKESTIJN
Q40 Mr Mitchell: Did I hear you say that
there are no dismantling facilities in the UK?
Captain Palmer: No, there are
none that could take ships of that size. We were talking about
dismantling a Very Large Crude Carrier.
Q41 Mr Mitchell: That is just the VLCCs?
Captain Palmer: Yes. I am not
quite sure what the biggest ship they can take in the UK is, but
it is not very big in comparison if you are talking about oil
tankers, no.
Q42 Mr Mitchell: This issue which we
discussed earlier, which is the American Navy vessels going to
Hartlepool, could that be the basis of a beginning of a British
dismantling industry?
Captain Palmer: I think the sizes
of ships they are talking about taking there, once again are at
the smaller end of the range, but nonetheless they are a reasonable
size and certainly there are plenty of ships that will be coming
up for recycling in the next few years in Europe. I think one
of the things you need to look at as to whether that industry
would be viable would be whether it can be done at a cost which
is reasonable and whether it can be done safely and properly.
I think the issue of the safely and properly one is one that clearly
is not one that I can answer but I would see no reason why it
could not be done safely and properly here. The cost one is an
interesting question. There are other facilities in Europe. There
are facilities in Holland, I think, there are facilities in Turkey
and there are facilities in Spain that dismantle vessels. A lot
of it comes down to whether it would be economically acceptable,
firstly as to what price they can do it at, but secondly you look
at the voyage length that the ship would have to travel. Are people
going to send small coastal vessels out to the Far East for dismantling?
The answer is probably, no, if there are available facilities
closer to home because it is not an economic thing to do. In the
case of large international trading ships, that is rather different.
They are probably out that way anyway when they reach the end
of their lives; they are their normal trade routes. So the question
of could there be a viable industry, well, I guess that will depend
on the cost structure that it can produce but there is logically
no reason why there could not be.
Q43 Mr Mitchell: But it would not be
of great interest to you?
Captain Palmer: It might be for
some of our smaller coastal tonnage, yes.
Q44 Mr Mitchell: Only the smaller vessels.
At the moment you do not send those smaller vessels to what facilities
exist in Holland or Spain?
Captain Palmer: Correct. Well,
we have got some coming up later this year and we will be looking
at where they are going fairly shortly.
Q45 Mr Mitchell: Okay. So is the argument
between dismantling ships in developed countries compared with
dismantling them in less developed countries like India, Bangladesh
or China primarily one of the capacity that they can take?
Mr Blankestijn: The way I see
it, it is what is the market, how is the market divided, and I
think Captain Palmer already said the smaller vessels—the
economical turning point—which will not all the way sail
to Asia, while the bigger commercial ships will, but that is the
commercial ships. On the other side there is still the segment
of ships that are a problem, which no longer sail because they
do not get the certificates, and that is of course a category.
Another category is governmental ships, which in the case of Hartlepool
is a matter and they have another economical value. So you look
at the market segmentation in relation to the facilities at hand
and those should find their market mechanism.
Q46 Mr Mitchell: Right. There is no virtue
for the bigger ones in being dismantled close to home, as it were?
There is less of a voyage.
Mr Blankestijn: If I mention to
you the cost element, say triple the cost factor probably here
versus Asia, then for the bigger tonnage economy scale—
Q47 Mr Mitchell: Okay. So the two arguments
are the size of vessels they can take and secondly uncompetitiveness?
Captain Palmer: Yes, assuming
there was the same health and safety framework in both cases.
So you have eliminated one area of contention, which is that we
would require wherever it was done that it can be done properly.
The next question then is an economic decision of which is the
right place to go, and capacity.
Q48 Ms Atherton: But you would not be
eliminating that there is the same level of environmental issues
or that the corporate social responsibility, say, of the wages
that are paid to the people who are doing the work would be the
same, so you are not likening like with like, are you?
Captain Palmer: No. That is the
same with a number of issues. There is a number of industries
which move to different parts of the world depending on the cost
of the labour market. It is a labour intensive industry dismantling
ships. That does not mean to say that facilities cannot and do
not exist commercially viably in Europe; there is a number of
them there at the moment.
Q49 Ms Atherton: But not for the very,
very big ships. Is there anything in the developed world that
could actually take these very big ships? Could one of the P&O
ferries be dealt with in a developed country?
Captain Palmer: Oh, yes.
Q50 Ms Atherton: And the bigger tankers,
could they be dealt with?
Mr Blankestijn: If the facility
is there then it can, yes, but as I said, it is a matter of price
and this is in a global situation.
Q51 Ms Atherton: I am sorry, I am not
following. Are you saying to me that if I had a multi 10s of thousands
of tonnes, big tanker type of ship that I could opt to go to an
environmentally and socially responsible company, in terms of
its employee relationships in a developed country; I could do
that tomorrow?
Mr Brownrigg: If the facilities
exist.
Q52 Ms Atherton: That is what I am asking
you, are those facilities there?
Mr Brownrigg: No, they do not
tend to exist—
Captain Palmer: There are two
parts to your question. The first one is, they do not exist.
Q53 Ms Atherton: They do not exist?
Captain Palmer: There are none
that can take ships of that size, that I am aware of. But the
second part, which I would take issue with you on, would be to
say that those countries that we do deal with, in China, are not
doing exactly those things you are talking about, which is treating
their staff properly, paying them properly in relation to their
own economy, looking after their welfare and doing all those other
things. I think that is a very incorrect perception of how it
is done in those places.
Q54 Ms Atherton: I am trying to find
out the answers. I am trying to stimulate you to come back—
Captain Palmer: That is fine.
Well, I did.
Q55 Ms Atherton: You are prepared to
say that you are satisfied with the standards despite criticisms
that have been made by organisations?
Captain Palmer: Correct. The criticisms
that have been made of Bangladesh, Pakistan and India I would
have some sympathy with. If those same criticisms were extended
to all of the facilities in China, I would not have the same degree
of sympathy with it because I do not believe that is correct.
Q56 Ms Atherton: One last question. If
I was thinking of setting myself up as a company dismantling these
multi-thousand tonne tankers that we have talked about, what would
be the competitive elements they would need to actually encourage
you? What would be the differentiation between China and Bangladesh
that you might find attractive as a company?
Captain Palmer: Well, a lot of
it would be on their ability first of all to be able to do it
in the timeframe required, to be able to demonstrate all those
things to a company like ours that we have discussed, to be able
to do it competitively. A lot of it is to do with scale. It rather
depends what scale you are operating on. Most things are more
effective if they are done on a large scale. That is certainly
true in ship building and it ought to be true at the other end
of it as well. So I think it is not impossible and, as I say,
there are European yards that do that today. So the question is
whether the UK could be competitive in comparison with people
operating clearly in very similar legislative frameworks in Holland
and Spain, for example, two fairly close EU countries.
Mr Blankestijn: And the facility
here could use more modern techniques, in which they would not
even think of investing because the labour costs are much cheaper.
So there are elements which are even more environmentally friendly
if you do them in a very hi-tech way. We are talking about percentages
differences probably.
Captain Palmer: It is quite interesting
comparing China with India and Pakistan because labour costs are
much higher in China than in Pakistan for the work that they are
doing. They use a lot more mechanisation in China to do the work,
which is actually one of the attractions of it to us, than in
the other cases where they use a far higher human element, which
clearly involves more risk.
Q57 Alan Simpson: Just sticking with
Candy's question, when you say there are no dismantling facilities
in the UK, if you take the other countries and the divisions you
have identified between China, Pakistan and Bangladesh, where
does the investment money come from to raise the environmental
standards?
Captain Palmer: In China I can
give a good example. There were existing facilities. Some of them
were originally shipbuilding yards which actually converted themselves
into dismantling facilities. They saw it as actually being something
in which they could differentiate themselves in the market to
actually attract customers like us and they actually see the investment
that they have made in their facilities as being one that gives
them a market advantage when they are looking to socially responsible
shipowners for facilities to go to. So they are commercial ventures.
They are doing it on a private investment basis.
Mr Blankestijn: But also supported
by the government because the Chinese government is now in the
process of certifying yards and giving them green lights for import
licences for certain vessels, or not letting them, or completely
closing down those facilities within a period of time. So what
the industry started the government is now taking over by more
or less safeguarding the guys who were taking their responsibility
in their facilities to make sure that they stay in business and
not being competed out of it by the ones that do not do those
things.
Q58 Alan Simpson: Presumably you would
welcome that rating?
Mr Blankestijn: Very much, yes.
Q59 Alan Simpson: Does that get followed
by you as an industry on the basis of saying, "These are
the standards that we will only approve for dismantling and recycling,"
because it seems to me that you have a choice in fact? Since you
are paying, there is a choice to be made about where you would
direct your purchasing choices to.
Captain Palmer: It would obviously
be in our interest for every yard in the world to be operating
to exactly the same standards, the highest possible standards,
so that we could then simply make an economic decision on where
to do it and not have to actually look at some of those other
issues. So clearly there is a benefit in that process. Is it a
particular issue for us? Well, actually, no. The average age of
our fleet now is two and a half years, so it is not something
we are going to have to worry about for a few years.
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