Shipbreakers paying for shot at government ships

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 ahold of 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 also 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 last 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 for the No. 1 heavy melt steel was $254 per gross ton, Garino said. In 2001, when the Maritime Administration was struggling to clear its inventory of ships, the same steel averaged $75 per gross ton.