Where the Jobs Are – One Scenario: Ship-breaking

Go Lean Commentary

Here is how the human psyche is wired:

We yawn at creation, yet wow at destruction.

With that accepted fact, comes the realization that there is a business model in destruction. Jobs can be created in the art and science of destruction (demolition, recycling and turn-arounds).

This is where the next round of new jobs are to be found …

… so says the book Go Lean…Caribbean which calls for the elevation of Caribbean economics. The book assesses the challenges of the tourism product in the Caribbean region, especially since 2008, where the influx of American tourists has slowed, due to economic realities in their homeland: the middle class is shrinking, the poor is expanding, and the One Percent is growing in affluence, influence and power.

It is what it is! According to recent blog commentaries, certain amenities of the tourism product, the mainstay of Caribbean economy, have now come under attack by social change: Golf and Casino Gambling.

So with the regional tourism business models being based on American middle class prosperity, these harsh realities have now come to fruition. The book therefore posits that there is a need to re-focus, re-boot, and optimize the engines of commerce so as to make the Caribbean a better place to live, work and play. And thus, this new focus on “destruction”, and the accompanying jobs.

Consider these two news articles that describe a business model in which opportunities exist and fulfilling those needs create jobs:

Title #1: International Shipbreaking Limited Wins Contract for Dismantle Constellation – June 13, 2014

Shipbreaking - Photo 4The [US] Navy competitively awarded a contract to International Shipbreaking Limited [a] of Brownsville, Texas, for the towing, dismantling and recycling of conventionally powered aircraft carriers stricken from service, June 13, 2014. Under the contract, the company will be paid $3 million for the dismantling and recycling of the decommissioned aircraft carrier Constellation (CV 64). The price reflects the net price proposed by International Shipbreaking, which considered the estimated proceeds from the sale of the scrap metal to be generated from dismantling. The Navy continues to own the ship during the dismantling process. The contractor takes ownership of the scrap metal as it is produced and sells the scrap to offset its costs of operations.

This is the third of three contracts for conventional aircraft carrier dismantling. All Star Metals of Brownsville was awarded the first contract Oct. 22, 2013, which included the towing and dismantling of ex-USS Forrestal (AVT 59). ESCO Marine of Brownsville was awarded the second contract May 8, 2014, for the scrapping of ex-USS Saratoga (CV 60). After the initial award of one carrier to each successful offeror, the Navy has the capability of scrapping additional conventionally-powered aircraft carriers over a five-year period under delivery orders competed between the three contractors.

Shipbreaking - Photo 4 NEWInternational Shipbreaking will now develop its final tow plan for the Navy’s approval for the tow of Constellation from its current berth at Naval Base Kitsap, Washington, to the company’s facility in Brownsville. The ship is expected to depart Kitsap this summer. Navy civilian personnel will be on site full time to monitor the contractor’s performance during dismantling of the ship.

Constellation was the second Kitty Hawk-class aircraft carrier to be built. She was laid down Sept. 14, 1957, at New York Naval Shipyard in Brooklyn, New York, and was the last U. S. aircraft carrier to be built at a yard outside of Newport News Shipbuilding and Drydock Company. The ship was commissioned Oct. 27, 1961. After nearly 42 years of commissioned service, Constellation was decommissioned at the NavalAirStationNorthIsland in San Diego Aug. 6, 2003. In September 2003, she was towed to the inactive ship maintenance facility in Bremerton to await its eventual disposal.
Title #2: Muddy Waters – Are U.S. shipping companies still sending their clunkers to the toxic scrap yards of South Asia?

By: Jacob Baynham – Cincinnati, Ohio-based writer

When the 30-year-old cargo ship MV Anders cruised out of Norfolk, Va., at 11 p.m. on Wednesday, Aug. 26, it may have been sailing through one of the largest loopholes in U.S. maritime regulations.

CU Blog - Where the Jobs Are - One Scenario - Photo 1Three weeks earlier, the Anders was a U.S.-flagged vessel called the MV Pfc. James Anderson Jr., named for a young Marine who saved his platoon members’ lives by falling on a Viet Cong grenade. It had hauled cargo for the U.S. Navy for more than two decades and was now retiring. The ship’s new owners, Star Maritime Corp., had renamed it the Anders, painted over the excess letters on the hull, and raised the flag of its new registry—the Caribbean nation of St. Kitts and Nevis. The Anders left Virginia empty.

Its 29-year-old sister ship, the MVBonny (formerly the MV 1st Lt. Alex Bonnyman), followed two days later under the same flag and ownership. The Coast Guard listed the ships’ next port of call as Santos, Brazil. But environmental groups, trade journals, and industry watchdogs claim the ultimate destination for these aging vessels will be the Dickensian scrap yards of Bangladesh.

The Anders and the Bonny served in the U.S. Navy’s Military Sealift Command for 24 years. Stationed at Diego Garcia in the Indian Ocean, they delivered military cargo during both Iraq wars, as well as Operation Restore Hope in Somalia. But the Navy never actually owned the ships. They chartered them from Wilmington Trust, which sold them to Star Maritime earlier this summer. When Star Maritime renamed the ships and submitted an application to reflag them under St. Kitts and Nevis registration, environmental groups recognized the telltale signs of vessels about to be scrapped and cried foul.

The Basel Action Network, a Seattle-based environmental group leading the campaign to stop the export of old ships for scrap, monitors old vessels in U.S. waters and alerts the EPA when their owners attempt to recycle them overseas. There are several reliable warning signs. First, a ship is sold to an obscure company (which U.S. ship-breakers call a “Last Voyage Inc.”), which is sometimes a subsidiary of a larger company active in the scrapping business. Then it is renamed and registered under another nation’s flag before sailing to South Asia.

“It’s outrageous that these ships were allowed to sail,” says Colby Self, director of BAN’s Green Ship Recycling campaign. “In a sense, they were government vessels.” But once the ships’ contracts had expired, all legal responsibilities lay with their owners.

Most of the world’s old ships are sent to die on the shores of India, Pakistan, and Bangladesh. Vessels are beached there at high tide and cut into pieces by teams of poorly paid migrant workers. Heavy equipment and cranes are inoperable on the sand, so workers dismantle the ships by removing large portions, which drop to the beach. They use fire torches to cut through steel hulls—even those of old oil tankers. Dozens of workers die each year from explosions, falling steel, and disease. As for the asbestos, polychlorinated biphenyls (PCBs), tributyltin (TBT), and other toxic materials onboard the old ships, much of it washes out to sea. (PCBs and TBT are persistent organic pollutants that work their way up the marine food chain and damage the nervous systems of large mammals.)

If the Anders and Bonny are headed to Bangladesh, they won’t be alone. South Asia’s ship-breaking yards are experiencing an ironic boom in the middle of the global recession. Ship owners faced with shrinking cargo volumes are culling their fleets by scrapping old vessels rather than paying for them to sit empty. South Asia’s yards, which take advantage of cheap labor, scant regulations, and high regional demand for steel, will buy a vessel for twice the price a U.S. ship-breaker could offer. In Bangladesh, ships like the Anders and Bonny (which are two-and-a-half football fields long and weigh more than 23,000 tons) are worth at least $7 million apiece.

In 1998, the Clinton administration slapped a moratorium on scrapping U.S.-flagged vessels overseas after the Baltimore Sun ran a Pulitzer Prize-winning string of stories about the conditions of the South Asian scrap yards. But ship owners have dozens of so-called “flags of convenience” at their disposal to circumvent the ban. Most of these flags belong to small, poor countries with little maritime oversight—places like St. Kitts and Nevis.

Ship owners submit their reflagging requests to the U.S. Maritime Administration (MARAD), which considers whether the ships would be needed for national security in the event of war. For old vessels, this is seldom the case. MARAD began alerting the EPA of old ships attempting to reflag after the SS Oceanic, a former Norwegian Cruise Liner, slipped out of San Francisco last year with almost 500 tons of asbestos and PCBs onboard.

The Toxic Substances Control Act of 1976 prohibits the export of PCBs, asbestos, and lead-based paint—materials often used in the paint, cabling, and gaskets of older ships because of their fire-retardant qualities. If the EPA suspects a vessel applying for reflagging contains hazardous materials, it can order that vessel to be tested. But because ships are not required to inventory these materials, and the EPA has limited time and resources to devote to every old ship, environmentalists contend that each year many vessels slip through the cracks.

In the case of the Bonny and Anders, EPA spokesman David Sternberg says, “Based on the available information, the EPA has no sufficient reason to contain these ships.” Sternberg adds that the EPA received a letter from the new owners insisting the vessels will be used in trade and will not be scrapped.

This seems unlikely to Kevin McCabe, founder of International Shipbreaking Ltd. in Texas. He says buying two cargo ships at the end of their life spans for their utilitarian purposes alone would “belie the economics of the market today.” McCabe is convinced that the Bonny and Anders will be scrapped in Asia. And he doesn’t think they’re clean, either. “I’ll bet you dollars to doughnuts that there are PCBs on those ships,” he says. “No question about it.” The EPA would be singing a different tune if the ships were to be dismantled at his Brownsville recycling facility, he adds. “When we scrap a ship, we must assume it has hazardous material onboard until we can prove otherwise.”

Colby Self of BAN says he’s disappointed that the Obama administration could so easily let these ships slip away. “[The EPA] made a calculated decision based on their low-risk assessment, and they let them go,” he says. Under the Bush administration, the EPA was very diligent in following up on BAN’s warnings, he says.

But Self isn’t giving up hope that the ships can be stopped before they wash up on South Asian shores. “We will be warning Bangladesh to bar the entry of these renegade vessels,” he says. “This story is far from over.”

The above two articles depict “two sides of the same coin”: what happens when ship-breaking is done right, and done wrong.

The book Go Lean… Caribbean, serves as a roadmap for the introduction and implementation of the technocratic Caribbean Union Trade Federation (CU) with the charter to facilitate jobs in the region. We want to explore all the strong benefits of the shipbuilding (including ship-breaking) industry, by doing it right – more safety precautions than Bangladesh and lower labor costs than Brownsville-Texas. This aligns with the CU charter; as defined by these 3 prime directives:

  • Optimization of economic engines in order to grow the regional economy to $800 Billion and create 2.2 million new jobs.
  • Establishment of a security apparatus to protect the resultant economic.
  • Improve Caribbean governance to support these engines.

Early in the Go Lean book, the responsibility to create jobs was identified as an important function for the CU with this pronouncement in the Declaration of Interdependence (Pages 14):

xxvi.  Whereas the Caribbean region must have new jobs to empower the engines of the economy and create the income sources for prosperity, and encourage the next generation to forge their dreams right at home, the Federation must therefore foster the development of new industries, like that of ship-building, automobile manufacturing, prefabricated housing, frozen foods, pipelines, call centers, and the prison industrial complex. In addition, the Federation must invigorate the enterprises related to existing industries tourism, fisheries and lotteries – impacting the region with more jobs.

CU Blog - Where the Jobs Are - One Scenario - Photo 3According to the foregoing articles, ship-breaking activities in Third World countries, like Bangladesh, pose harm to the environment, workers and remaining systems of commerce. But when executed correctly, as in Brownsville-Texas, ship-breaking can be all positive. There are benefits in applying the appropriate best practices in handling hazardous materials. The tons of toxic waste (asbestos) can be properly managed and disposed of, with the proper eco-system surrounding the industry. The CU will facilitate the eco-system, especially with the Self-Governing Entities (SGE) concept for shipyards. This is covered in the Go Lean book under the auspices of “turn-around” industries, a federally regulated/promoted activity.

The Go Lean book also details the principle of job multipliers, how certain industries are better than others for generating multiple indirect jobs down the line for each direct job on a company’s payroll. The shipbuilding industry has a job-multiplier rate of 3.0. According to a report by the University of Strathclyde’s Fraser of Allander Institute in Scotland, a local reduction-in-force of 800 jobs at Govan & Scotstoun Shipyards will result in total job losses across Scotland of around 2,400 jobs, including those at the shipyards. (Source: http://www.scotsman.com/news/politics/top-stories/clyde-shipyard-cuts-may-lead-to-2-400-job-losses-1-3179593).

The Go Lean… Caribbean book details the creation of 15,000 direct jobs for the shipbuilding industry in the Caribbean region. Once the job multiplier is applied, the economic impact is that of 45,000 jobs.

How would the Caribbean advance from 0 to 45,000 jobs in the course of the 5-year roadmap? By adoption of empowering community ethos, plus the execution of key strategies, tactics, implementations and advocacies. The following is a sample:

Community Ethos – Deferred Gratification Page 21
Community Ethos – Economic Principle – Economic Systems Influence Choices & Incentives Page 21
Community Ethos – Economic Principle – Voluntary Trade Creates Wealth Page 21
Community Ethos – Job Multiplier Page 22
Community Ethos – Lean Operations Page 24
Community Ethos – Ways to Impact the Future Page 26
Community Ethos – Ways to Help Entrepreneurship Page 28
Community Ethos – Ways to Impact Research & Development Page 30
Community Ethos – Ways to Impact Turn-Around and Recycling and Demolition Industries Page 33
Community Ethos – Ways to Impact the Greater Good Page 37
Strategy – Mission – Facilitate a Shipbuilding Industry Page 46
Tactical – Fostering a Technocracy Page 64
Tactical – Tactics to Forge an $800 Billion Economy – High Multiplier Industries Page 70
Tactical – Separation of Powers – Self-Governing Entities Page 80
Implementation – Ways to Pay for Change Page 101
Implementation – Steps to Implement Self-Governing Entities Page 105
Implementation – Ways to Deliver Page 109
Planning – Ways to Make the Caribbean Better Page 131
Advocacy – Ways to Grow the Economy Page 151
Advocacy – Ways to Create Jobs Page 152
Advocacy – Ways to Improve Emergency Management Processes and Systems Page 196
Advocacy – Ways to Foster Technology Page 197
Advocacy – Ways to Develop/Grow a Ship-Building Industry Page 209
Appendix – Job Multipliers Page 259

The CU will foster industrial developments in support of tourism and as an alternative to tourism. Shipbuilding / ship-breaking is a prime-and-ready endeavor. The number one ingredient in the recipe for success in this industry is access to waterways, harbors and ports. The second most important ingredient is the willingness of the people to engage.

After the new pitfalls of tourism’s changing dynamics, the Caribbean people should now be ready for this industrial challenge of ship-breaking.

The Caribbean is arguable the best address on the planet, but a lot of infrastructure is missing; infrastructure like jobs. While this (Go Lean roadmap and accompanying blogs) is the start, the end of this roadmap is a clearly defined destination: a better place to live, work and play.

Download the book Go Lean … Caribbean – now!


Appendix a:

Company Overview: International Shipbreaking Limited LLC

International Shipbreaking Limited LLC provides dismantling and recycling services for maritime vessels and equipment. It offers various ferrous products, such as plate and structural steel, re-roll plate, cast iron, sheet metal, and scrap products; and non-ferrous products, including aluminum, brass, copper, cupro-nickel, lead, and non-ferrous scrap products. The company provides reusable equipment, such as propulsion systems, generators and engines, anchors, chains, and windlasses, as well as film projection machines, x-ray equipment, washing machines, kitchen galley tools, beds, lockers, gun racks, lighting fixtures, chairs, tables, and desks. It also offers artificial reefing.

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