The Shipbreaking Site and the Banks Financing Ships: The Kurosaki Fire Illuminates the Duality of “Dismantling and Building”

Black smoke rose from a shipbreaking site along the coast of Ondo-cho in Kure City. An evacuation order was issued for 356 households—this number signifies that the work of dismantling ships can no longer be considered a mere occurrence in a corner of the port. In the same week, Hiroshima Bank reported plans to increase its ship financing balance to 1.3 trillion yen, a 40% increase compared to the previous year. In a city where funds for building ships are swelling, a shipbreaking site is ablaze. These two events may have coincidentally overlapped in timing. However, for those familiar with the structure of Kure, the proximity of these events is too close to dismiss as mere coincidence.

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What Burned Was the “Exit”

The fire was reported shortly before 1 PM. It broke out at a shipbreaking site in the Watoko area of Ondo-cho, Kure City, spreading to dismantled ships and debris, and even igniting moored vessels. Firefighting efforts lasted over five hours, with large amounts of black smoke drifting into residential areas. The fact that an evacuation order was issued for 356 households directly indicates the physical proximity between the dismantling site and living areas.

The cause of the fire is under investigation, and there are limits to what can be definitively stated at this time. However, from a structural perspective, shipbreaking sites accumulate flammable materials such as paints, oils, and FRP (fiber-reinforced plastics). These materials are unavoidable in ship construction, and the process of separating and processing them during dismantling has long been noted within the industry as increasing the risk of fire.

It is worth pausing to consider where the work of “shipbreaking” is positioned within the shipbuilding industry. Ships have a lifespan. Generally, commercial vessels last 25 to 30 years, while smaller vessels may have shorter lifespans. Once a ship reaches the end of its life, it must be dismantled somewhere. In other words, shipbreaking represents the “exit” of the shipbuilding cycle. Ships are built at the entrance, sail the seas, and eventually are broken down at the exit—this fire represents the structural significance of that exit burning.

According to the Ministry of Land, Infrastructure, Transport and Tourism, the annual number of FRP vessel dismantling in Japan is in the thousands, but the system for proper disposal is far from adequate. The cost of disposal ranges from several hundred thousand yen per vessel to over a million yen for larger ones. The heavy financial burden has led to deep-rooted issues of illegal dumping and abandoned vessels, making the existence of businesses that undertake dismantling a form of infrastructure for the region. This fire can be seen as illuminating the fragility of that infrastructure.

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1.3 Trillion Yen in Financing—Funds Flowing into the “Entrance”

On the other hand, the actions of Hiroshima Bank pertain to the “entrance” side of the shipbuilding cycle. The plan to expand its ship financing balance to 1.3 trillion yen, a 40% increase from the previous year, is an unprecedented scale for a regional bank. The background to this is the gradual strengthening of environmental regulations by the International Maritime Organization (IMO). From 2023 onward, existing vessels are required to comply with energy efficiency indicators (EEXI) and carbon intensity indicators (CII), leading to a global increase in demand for replacements for older vessels.

Hiroshima Bank is focusing on the development of specialized personnel and improving review efficiency through AI, aiming not just to increase the amount of financing but to strengthen competitiveness in the specialized field of ship finance. The Setouchi coastal area, including Kure City, is a hub for Japan’s shipbuilding industry, with major and small shipyards such as Imabari Shipbuilding and Tsuneishi Shipbuilding, and the ties between financial institutions in this region and the shipbuilding industry are deep. An increase in financing means that new ships will be built, which will eventually—20 or 30 years down the line—produce new dismantled vessels.

Few people may be aware of this time lag, whether in the financing or dismantling sites. However, Kure is a city that encompasses both within the same port. The entrance where funds for building ships flow in and the exit where dismantling occurs are geographically and structurally adjacent. This proximity is both the depth of Kure’s shipbuilding industry and the question posed by this fire.

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Who Supports the “Exit”?

Discussions about the shipbuilding industry often focus on the “entrance”—new ship orders, technological innovations, financing. This is understandable, as the economic impact is significant, creating jobs and being easily quantifiable. The financing amount of 1.3 trillion yen has a certain allure as news.

However, the discussion about the “exit” is not so glamorous. Shipbreaking has low profit margins, carries environmental risks, and is facing an aging workforce. Internationally, much of the shipbreaking occurs in South Asian countries such as Bangladesh, India, and Pakistan, where labor conditions and environmental pollution have been longstanding issues. The “Hong Kong Convention” on ship recycling, adopted in 2009, established safety and environmental standards for shipbreaking, but it will not come into effect until June 2025, taking 16 years since its adoption. Japan signed it in 2019, but how much the spirit of this convention has permeated domestic dismantling sites is another matter.

What should be questioned following this fire is not just the management systems of individual sites. How is the process of “breaking ships” positioned within the industrial cycle, who bears the costs, and what safety standards are applied—these fundamental design issues of the system are being called into question. Are future dismantling costs factored into the 1.3 trillion yen in financing? Is the structure of easy dismantling considered during the design phase of new ships? The stark contrast between the glamour of the entrance and the drabness of the exit reflects the absence of a system.

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The Nested Structure of Kure City

Kure City has walked alongside ships since the era of the former naval arsenal. With a history of constructing the battleship Yamato, it has continued operations with shipyards such as IHI (formerly Ishikawajima-Harima Heavy Industries) and Japan Marine United after the war. The Yamato Museum attracts nearly a million visitors annually, and the identity of being a “shipbuilding city” has become a tourism resource.

However, a city that builds ships is also a city that dismantles them. Ondo-cho is located at the southern end of Kure City, facing the Ondo Strait between Kurahashi Island, and has long been a port town where shipbuilding, repair, and dismantling intermingle. The dismantling site quietly exists in a cove a little distance from the large shipyards in the center. The glamorous story of “building” and the mundane reality of “dismantling” overlap like a nested structure within the same city.

This structure is not limited to Kure. It raises questions that resonate throughout Japan’s shipbuilding industry and even the manufacturing industry as a whole. Investment gathers around the act of creating, technology is refined, and people are nurtured. However, has equal attention and resources been devoted to the act of destroying—disposal, dismantling, recycling?

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Points of Future Attention

In light of this fire, the immediate priority will be to ascertain the cause and establish measures to prevent recurrence. Given the scale of the evacuation order for 356 households, it is highly likely that discussions will arise regarding the location and safety standards of dismantling sites.

At the same time, it is necessary to track how Hiroshima Bank’s expansion of ship financing will bring about changes in the region’s shipbuilding industry—such as increases in new ship orders, impacts on employment, and future implications for dismantling—over the medium to long term. With the impending enforcement of the Ship Recycling Convention, the standards required of domestic dismantling businesses will also change.

The shipbuilding cycle is long. The day a ship financed today is dismantled may be more than 20 years away. However, whether that “future” can be designed now will determine the next phase of Kure City.

A city that continues to run while holding both the funds for building ships and the sites for dismantling them now needs a discussion about the systems that connect the entrance and exit.