Known examples of beneficial cargo owners declining to deal with or place conditions on an ocean carrier over environmental concerns are not easy to find.
But in a possible sign that environmental agendas may soon creep into ocean carrier contracting, 32 BCOs, as a group, signed a statement condemning beach ship breaking in India, Bangladesh and Pakistan. To add extra emphasis, 11 of the named BCOs sent individual letters to carriers expressing their opposition to the practice.
The 11 companies — H&M, Stora Enso, Tetra Pak, Perstorp, Scania, KappAhl, Lindex, NEC, New Wave Group, Preem and Absolut — wrote to shipping companies protesting beach ship breaking as hazardous to safety and the environment, according to the Clean Shipping Index. The index is a tool used by cargo owners to evaluate the environmental performance of their ocean transport providers.
The letters to carriers come as ship breakers in South Asia are under pressure on a few key fronts, including a coming European Union ban on beach ship breaking that would favor European, Turkish and Chinese ship breakers over beach breakers in South Asia, and pressure on steel prices tied to the economic slowdown in China.
Out of a total of 1,026 ships dismantled globally in 2014, 641 ships, or 74 percent of total gross tonnage scrapped, were sold to facilities in India, Pakistan and Bangladesh. In those countries, ships are dismantled on tidal beaches amid dangerous working conditions, allowing chemicals to leak into the ocean, according to the NGO Shipbreaking Platform, an advocacy group. India remained the world’s largest ship recycling nation last year, with 300 ships demolished, according to Tradewinds. Pictures of ship breaking on the beach can be seen here.
“South Asia is still the preferred dumping ground for most ship owners as environmental, safety and labour rights standards are poorly enforced there,” Patrizia Heidegger, executive director of the NGO Shipbreaking Platform, said in January. Shipowners have an incentive to send ships to the beaches because it’s more profitable. Depending on raw-material prices, ship owners can realize up to $500 per tonne of steel from an Indian yard, compared with $300 in China and just $150 in Europe, according to Reuters.
The 32 members of the Clean Shipping Index in a statement on March 18 said they “strongly condemn and distance themselves from such ship breaking practices.”
The new European rules aim to stop what Karmenu Vella, European commissioner for the Environment and Maritime Affairs, called "the shameful practice of European ships being dismantled on beaches,” as reported by Reuters on March 31. The European rules will mandate that EU-registered ships be recycled only at facilities deemed sustainable, a list of which expected to be published next year and will likely include facilities China, Turkey, North America and the European Union, but not South Asia where beach ship breaking occurs.
Haiderali G. Meghani, the director of International Steel Corporation, a large ship recycling firm based in Alang, India said concerns about poor safety and environmental standards in India were misplaced. "We are almost near to European standards," he said told Reuters.
“These ship breaking industries (on the beach) have put food on the table for many thousands of poor families and numerous communities have mushroomed in the vicinity of these ship breaking yards....which support their livelihoods,” Capt. Rabinder Singh, an India native and currently Singapore-based marine surveyor and consultant with Sukhpal Maritime Transport, told JOC.com.
Among the BCOs that reached out to carriers was the clothing retailer H&M. According to the company’s global logistics transport manager, Mats Samuelsson, “We want to use our scale to bring about systemic change to our industry and across our entire value chain. The biggest climate impact along the value chain occurs outside of our operations. This is why we work upstream with our transport providers alike to help them cut their climate impacts,” he said in a statement on the Clean Shipping Index website.
Although most BCO members of the Clean Shipping Index, didn’t send individual letters to shipping lines, they are still raising the issue with their carriers in different ways.
“Some have bilateral meetings and discussions with the concerned carriers and some deal with this in the procurement process – and others do a combination of this. Some have decided to use the letter from the network and create their own version of it,” Sara Sköld, director and environmental specialist, told JOC.com in an email.
One apparel company and Clean Shipping Network, Lindex, says on its website that 85 percent of its products are shipped by ocean freight and that the ocean mode "has the potential to work as a transportation with low environmental impact."
Still, publicly proclaiming support for an environmental objective and actually declining to use certain shipping companies or putting conditions on their performance that impact the commercial relationship are two different things. Chas Deller, a partner in 10XOCEANSOLUTIONS Inc., which advises shippers in contract negotiations, said he had never heard of actual decisions being made by BCOs based on carriers' response to their environmental-related questions on Requests for Proposals.
“Fact is, most carriers skip the actual questions in the RFP and give their own " chapter and verse" answers in their own standard format,” said Deller, who who retired last year as head of global ocean freight procurement for UTi Worldwide in September after 39 years with the company, told JOC.com. “With the current alliance structure it's almost impossible for a BCO to control which carrier within the alliance will be ‘carrying’ your freight at any given time —very hard to enforce.”
If contracts between large retailer, manufacturing and other BCOs are to reflect environmental priorities such as ship breaking, they need to happen now, since most 2015-2016 contracts in the Asia-U.S. market take effect on May 1 and are currently being negotiated.
The NGO Shipbreaking Forum said the carriers that sent the most of the 641 “end of life” ships to the beaches in South Asia last year were German ship owner Ernst Komrowski, with 14 (all formerly on charter to Maersk Line), Hanjin, with 11 ships and Mediterranean Shipping Co. in third place with an unspecified number. It cited Maersk and Hapag-Lloyd, as having committed themselves to the recycling of vessels in modern facilities off the beach. A difficulty in accountability results from shipowners selling old ships to middlemen who in turn send them to the beaches.
A Hong Kong convention on ship recycling has the support of some container carriers, but has the disadvantage of not yet being ratified as opposed to the EU ban, which was adopted in December, 2013. "The Hong Kong Convention is the ideal standard for ship recycling and should not be undermined [by the EU SRR]," said Yang Ming chairman Frank Lu at the Tradewinds Ship Recycling Forum in Singapore on 11 March, as reported by IHS Maritime 360, a sister brand of JOC.com within IHS Maritime & Trade.
The Hong Kong convention is designed to ensure that ship recycling does not threaten human health, safety, and the environment, whereas the EU rule mandates that European-flagged ships are recycled in pre-approved yards, which doesn’t include beach facilities.
Source: JOC.com. 5 April 2015