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Shipbreakers covet America's rusted hulks

BROWNSVILLE, Texas — The air tastes like pennies at this gritty port at the southern tip of Texas, where ships' final voyages end and steel is reborn.

Recycling here is big business, on a scale that counts in thousands of tons, not pounds. It's where torch-wielding workers strip ships' decks and cut their hulls for the metal to form new steel that could end up in washing machines or even new ships.

For years the federal government paid the shipbreakers at the Port of Brownsville — the center of the U.S. shipbreaking industry — to dispose of its rusted frigates and tankers.

But soaring scrap metal prices have led these companies to begin paying the federal government for the chance to get all that valuable steel.

International Shipbreaking Ltd. recently began recycling Adonis, an 18,000-ton tanker built in 1966. The company paid the U.S. Maritime Administration an unprecedented $1.1-million for the privilege, on top of the cost of towing it from the reserve fleet's home in Beaumont, Texas, nearly 700 miles up the Gulf Coast.

"That was directly influenced by the price of scrap," said ISL's chief operating officer, Bob Berry.

The Navy, which contracts with shipbreakers to dispose of warships, isn't allowed to take money from the companies, but was able to give Esco Marine Inc. a symbolic 1 cent to take the USS Puget Sound off its hands this year.

That means the Puget Sound's metal is expected to more than cover the cost of towing it from Philadelphia and the work of removing hazardous materials, including asbestos and toxic PCBs.

"We're at numbers we've never seen before for iron and steel scrap," said Bob Garino, director of commodities with the Institute of Scrap Recycling Industries. Looking over the past 25 years of prices for the benchmark "No. 1 heavy melt," which in April hit $502.50 per gross ton, Garino said, "there's not even a close second."

Demand for scrap metal has been a major factor in dictating what shipbreakers are willing to pay and in drawing more of them into the business domestically. The Maritime Administration has seven certified companies, two of which the Navy shares. When the Maritime Administration started the current program in 2001, there were three.

Four companies' yards are spread around the end of the Brownsville port's 17-mile man-made channel to the Gulf of Mexico. A fifth, Virginia company is waiting for its permit to be approved by the U.S. Army Corps of Engineers.

The Navy had about 200 ships to dispose of in 1997 and now has 15 designated for scrapping. Some others were sunk for training and others to form reefs.

Jason Glasscock, ISL's environmental and safety program manager, said, "it's hard calling it scrap when it's worth that much money."

By the numbers | Price of steel

Sky-high prices for scrap metal are allowing the Maritime Administration to stretch its funding further and recycle more of its ships. In 2001, the average recycling cost per ton for the Maritime Administration was $253. Last year it fell to $60. Here is how prices, per gross ton, have changed for the benchmark "No. 1 heavy melt."

April: $502.50

2007: $254

2001: $75

Shipbreakers covet America's rusted hulks 05/13/08 [Last modified: Tuesday, May 13, 2008 10:34pm]
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