Recycling ships, revitalising ports: Assessing the economic viability of diversifying coal ports with ship recycling

Abstract

The global ship recycling industry, dominated by South Asia, faces increasing scrutiny over environmental and safety practices. Simultaneously, a growing move away from coal in the run-up to 2050 will threaten coal ports, challenging them to diversify. This study explores the potential of embedding ship recycling into the transport geography of coal ports that are diversifying to circular economy hubs. We examine a case study of the Port of Newcastle in Australia, currently the ‘world’s largest coal port’. Using a System Dynamics (SD) model, the study evaluates key factors including global demand, operational costs, carbon credits, and recycled material revenues across four scenarios. The base scenario shows the PON facility is unviable at a break-even price of $540 per LDT compared to South Asia’s $780 per LDT. However, profitability improves when key factors such as carbon credits and recycled steel prices are optimised, highlighting the potential for economic viability with targeted policy and market reforms. Further Monte Carlo analysis reveals a wide range of potential profit outcomes, from $-1,284,205 to $1,077,655, reflecting the financial uncertainties and risks associated with the facility. Overall, the study recommends reforms to stabilise the Australian Carbon Credit Unit (ACCU) market, develop a green steel industry, and promote sustainable ship design. With these measures, the proposed ship recycling facility at the PON would be profitable, economically sustainable, and well-positioned to compete globally, paving the way for a shift in the geography of ship recycling from unsustainable facilities in South Asia to developed countries with higher environmental and safety standards. This transition would support Australia’s circular economy aspirations, foster global best practices in sustainable ship recycling, and contribute to achieving its environmental goals.