Companies gladly pay to recycle federal ships

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 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 the company's chief operating officer, Bob Berry.

The Navy, which also contracts with shipbreakers to dispose of warships, isn't allowed to take money from the companies but was able to give Esco Marine a symbolic 1 cent to take the USS Puget Sound off its hands this year. The ship, launched in 1966 and decommissioned in 1996, was built by the Puget Sound Naval Shipyard in Bremerton.

The ship'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."

Just last year, the average price was $254 per gross ton, Garino said. In 2001, when the Maritime Administration struggled to clear its inventory of ships, the price averaged $75.

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.

Demand for scrap metal has been a major factor both 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.

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.

The domestic industry depends heavily on government contracts because commercial owners can dispose of ships more cheaply overseas, where there is little or no regulation. Brownsville's shipbreakers also hope that the Maritime Administration will resume sending its West Coast ships to their port.

Environmental concerns about the ships carrying species on their hulls that can wreak havoc on local ecosystems, as well as concerns over the lead paint released by attempts to clean them, have frozen the ships' movement since early 2007.