20 February 2018

Recycling - Volatility reigns

Another flat week concluded in the recycling markets, due to a steady reluctance from recyclers to pay some of cash buyers asking prices.

There were also some reverberating volatile fundamentals (in tandem with the recently rocky international stock markets) started to influence a nervous sub-continent recycling market, GMS said in its weekly report.

Local steel plate prices suffered another set of worrying reversals in midweek (just as global stock markets started to plunge), only to find their feet again in the final few days of the week, subsequently bringing some needed relief to the anxious ship-recycling sector.

Several cash buyers were still hoping that the markets hold going into the traditionally quieter Chinese New Year holiday period, as there remain several expensive and unsold vessels in a variety of hands.

Meanwhile, the VLCC market continues to shed tonnage at pace as news of yet another unit being committed, surfaced last week. This has taken the total to almost 10 units sold/beached for the year already, GMS said.

In the light of accusations that the company was behind the sale of four reefers for recycling, led by NGO Shipbreaking Platform, GMS said that it categorically denied being the buyer of, or associated in anyway with the purchase of the vessels mentioned by NGO.

GMS said it condemned the circulation of such false and inaccurate information. This reckless and reprehensible action by the NGO Shipbreaking Platform is intended to advance its own agenda and to manipulate public opinion by deliberately circulating ‘Fake News’ disguised as fact.

“It is regrettable that the NGO Shipbreaking Platform continues to abuse the power of their ‘megaphone’ by wildly spreading misinformation and ignoring the need to present fair and accurate information to the public,” GMS said.

GMS also said it was proud to have developed a responsible ship recycling programme (RSRP) through which, it has supervised the recycling of more than 30 vessels a year and has also motivated the interest of recycling yards in both India and Bangladesh to upgrade their standards of recycling in line with the Hong Kong International Convention.

Brokers reported that the 1999-built VLCC ‘Plata Pioneer’ to India or Bangladesh breakers for about $440 per ldt in a gas free condition.

In addition, the 1992-built Aframax ‘Basilia’ was said to have been committed to Indian sub-continent recyclers for $458 per ldt also in a gas free condition.

Source: tanker operator. 16 February 2018

Maersk believes several problems in Alang are now solved

Improvements at three yards in Alang have been so big, that they now represent a real alternative to China and Turkey, says Maersk CEO Søren Skou. However, the group acknowledges that there is still uncertainty with regard to the marine environment and problems with access to medical aid.

So much progress has now been made at a handful of yards in Alang, that they are either of equal quality or even better than their more well-reputed competitors in China and Turkey, says Maersk CEO Søren Skou in the group's new sustainability report. The report details how Maersk believes that many of the problems have been solved at the three yards where six vessels have been scrapped in the last two and half years since the company decided to start using 

"We're very aware that companies can no longer stay on the sidelines when it comes to global issues, and I'm very satisfied with the level of our sustainability ambitions," Skou says in the report, highlighting ship recycling as an example. 

"More specifically, I'm impressed with what has been achieved over such a relatively short period of time in the ship recycling project," says the CEO.

Maersk has received severe criticism on numerous fronts for using the beaching facilities in India where vessels are sailed directly onto the beach and dismantled in the tidewater zone. 

According to some critics, the method is so dangerous for workers and the environment that it should be completely forbidden. But in the group's sustainability report, Maersk describes an industry in the midst of change and describes Alang as a viable alternative to China and Turkey. 

However, the report also notes that there are still uncertainties concerning water pollution and unresolved issues with access to acute medical assistance. 

Six ships scrapped 

The first two Maersk vessels arrived at the Shree Ram yard in Alang in June 2016 and have since been followed by another four vessels at two neighboring yards. 

The decision to use the severely criticized yards was made on the grounds that improvements can better be achieved by making demands, rather than by avoidance all together. But it is not just a matter of creating better conditions for the environment and the workers. 

Indian yards typically pay USD 1-2 million per ship more than what they pay in China and Turkey, where experts say standards are higher. As such, there is also an economic reward for carriers when selling vessels for shipbreaking in India. 

Maersk has been open about this aspect. In February 2016, the group wrote in a sustainability report that it expected to make additional amount of up to USD 150 million over five years by scrapping vessels in India.

However, the group has since distanced itself from this number. In the new report, Maersk writes that it actually would have been more profitable to continue as before with a few ships sent to be scrapped every year in China and other old vessels sold on to new owners. 

Instead, Maersk stresses that the group wanted to use its position as the world's largest container carrier to create better conditions at the yards in Alang, which have historically been massive polluters and experienced several fatal accidents. 

Oils, metals and ship coating 

And according to Maersk, many of the problems have already been solved at the three yards which have been used so far. 

During the breaking of the six vessels, external consultants have continuously monitored whether the process has lived up to the group's standards. According to the report, the only remaining problem at the three yards, is that there is too much overtime work.


Maersk has also commissioned an environmental report which tested for 18 hazardous substances in the waters around the beaching yards. The report was finished in November 2017 and shows that 15 of 18 substances were at a level, which is deemed not dangerous for the environment. 

However, oil, metals and remains from anti-fouling coating were all above the limit. According to Maersk, the oil does not stem from the actual cutting of the vessels, but from ship parts and engines which have been dragged across the sand. However, there have been no leaks in 2017.The group further highlights that it does not use toxic ship coating and that tests show that the remains came from other sources. 

The picture is less clear when it comes to high levels of metals in the water. Maersk writes that the study's method does not make it possible to decide how much of the pollution happened as a consequence of the activities at the yards. It is further assessed that the level is the same as in China and Turkey. 

The release of toxic substances in the ocean typically happens when the vessel is cut up and the parts are allowed to fall into the tidewater zone. This method is still used in the primary cutting at one of the yards used by Maersk, while the two others now have a crane which can lift the parts directly onto an impermeable floor, Maersk notes. 

One hospital with 20 beds 

While Maersk believes progress has been made, there are still problems in Alang that extend beyond the individual yards. 

In April 2016, the European Community Shipowners' Association (ECSA) developed a report after an unannounced visit to the Indian coastal area where two representatives from Maersk Group also participated. 

The report shows that despite the hazardous work, there was only one hospital in Alang with room for around 20 people. Furthermore, there were two ambulances to drive injured workers to the hospital in the city Bhavnagar, which is around one hour's drive from the area. 

The number of employees in Alang fluctuates, but during peak periods there can be 30,000 to 40,000 workers. 

Maersk stresses in the report that all workers at the three yards which the company uses have been trained in safety and live under approved conditions. But the group further notes that lack of access to acute medical care is the biggest problem in Alang which has not been resolved. 

The carrier is therefore working to establish a mobile health care station and will further investigate other possibilities along with the Red Cross. 

Getting others on board 

Despite the lack of access to medical care and the dangerous concentration of oils, metals and coating remains in the water, Maersk still finds that the development is proof that standards can be lifted in Alang. 

"After 20 months, three yards in Alang, India, are performing at the same level or better than yards in China and Turkey, which used to be the only options for economically viable and responsible ship recycling," says CEO Skou in the new sustainability report. 

He thus thinks that other carriers should follow the example set by Maersk. 

"The door to changing an otherwise gridlocked situation has been opened, and we now need to accelerate this development," he says. 

This Thursday, ShippingWatch requested access to the environmental and safety reports which Maersk had commissioned, but had not received a response by the deadline for this article. 

Around 85 percent of the world's merchant fleet is scrapped in India, Bangladesh or Pakistan. The IMO's rules for responsible ship recycling in the Hong Kong Convention have not yet been ratified but are used as a standard by both yards and carriers. 

At the end of 2018, the EU's regulations in the area will take effect. Depending on who you ask, the EU rules do not allow beaching in practice.

Source: shipping watch. 16 February 2018

GMS Market Commentary on Shipbreaking in Week 07 - PAKISTAN POTENTIAL

Last week, on the back of a meeting between the Pakistan Ship Breakers Association (PSBA) and local authorities, ongoing rumors surrounding a potential Pakistan re-opening for tankers within the next month began to further intensify. The news may well be greeted with the usual degree of outlandish Cash Buyer speculation that we have frequently seen through the course of the recent past. However, the reality is that Pakistan is a market that too has softened in recent weeks and an influx of tanker candidates is hardly going to help in boosting levels from Gadani Buyers.

That being said, Sinokor of South Korea continued their clear-out of older tonnage with the sales of a Capesize bulker (a highly sought after and rare breed of vessels these days) in addition to an Aframax tanker, at some unsurprisingly bullish numbers.

Moreover, given the spate of fixtures through 2018, there was of course, another VLCC concluded on private terms this week, to swell the growing ranks of unsold tonnage out there, and perhaps another sign that Cash Buyer confidence on a Pakistan reopening may be well-founded.

Meanwhile, pricing has remained stagnant for several weeks now, with marginal declines witnessed in both India & Pakistan and Bangladesh just about holding onto their levels, through what has been an overall underwhelming start to the year for Chittagong buyers.

Finally, Chinese New Year holidays have certainly interrupted the flow of deals and deliveries (as minimal as they have been) this week and it may be a stilted week ahead as people slowly drift back to work from their various holidays.

Source: steel guru. 20 February 2018

Seatrade Case is a “Bleak” Development, Says GMS


Earlier this month, MarEx reported that, for the first time in Europe, public prosecutors are bringing criminal charges against a shipowner – Seatrade – for having sold vessels to scrap yards in countries “where current ship dismantling methods endangers the lives and health of workers and pollutes the environment.”

The case is being heard in a Rotterdam Court, and the Dutch Public Prosecutor calls for a fine of EUR 2.35 million ($2.9 million) and confiscation of the profits Seatrade made on the sale of four ships, as well as a six month prison sentence for three of Seatrade’s top executives.

According to the prosecutor, Seatrade opted for using a cash buyer, rather than recycling the ships in a safe and clean manner, for purely financial reasons.

GMS has denied being the cash buyer involved, although initially cited in a statement by the NGO Shipbreaking Platform, and MarEx spoke to Dr. Nikos Mikelis, Non-Executive Director for GMS, to find out how he sees the case:

“The fact is that we do not know the circumstances behind the Dutch Public Prosecutor’s decision, nor the defence case of Seatrade. Therefore it is not possible, nor wise, to comment on what took place, or on what is the likely outcome of the criminal prosecution.

“Reading, however, the prosecutor’s statement that: “Seatrade opted to use a cash buyer rather than recycle the ships in a safe and clean manner” leads me to think that the Prosecutor’s understanding has been shaped by the NGO Platform who equates cash buyers to the exploitation of workers and to the destruction of the environment. The fact that almost all end-of-life commercial ships are sold through cash buyers must be just an inconvenient fact to the Platform; in the same way as the development in the last few years of responsible recycling programs and contracts between cash buyers and shipowners.

“For the sake of improved recycling standards in line with the Hong Kong International Convention and also for the sake of Europe's shipping, I hope that Seatrade and its lawyers will have in their possession all the arguments they need to defend this strange case. If the ideology of the Platform prevails then either the fleet of ships flying European flags will somewhat shrink through flagging out, or European shipowning will somewhat decline through marginal loss in competitiveness, or possibly both.

“The Seatrade court case is an important, if not bleak, development which underlines how vital it is to adopt realistic and achievable regulations in the first place. The Seatrade prosecution relies on the enforcement of the European Waste Shipment Regulation, which was not developed to regulate end-of-life ships and which has been proven to be the wrong instrument for ship recycling. After all, this is why the European Union is replacing this legislation with the new European Regulation on Ship Recycling for European flagged ships in less than one year’s time.”

Source: maritime executive. 17 February 2018

08 February 2018

What Will 2018 Bring to the Ship Recycling Industry?

One year ago I contributed an article to The Maritime Executive anticipating that 2017 would bring two important developments to the ship recycling industry. In the first place I anticipated a major breakthrough towards the entry into force of the Hong Kong Convention through the promised accessions by Denmark and India, and secondly I had expected that the European Commission would announce a list of non-E.U. yards approved for the recycling of E.U. flagged ships.

Denmark did accede to the Convention in 2017, opening the way to any other skeptical E.U. Member States, by highlighting a final break away from Basel Convention as the preferred international convention for regulating ship recycling by the Danish Ministry of Environment. I think that in 2018 we will start seeing a growing number of countries acceding to the Convention and if I had to guess, I would say that Germany, the Netherlands, possibly Italy, Estonia, and, from Asia, Japan may accede to the Convention in 2018.

Whilst India did not accede to Hong Kong Convention in 2017, it nevertheless issued in December a pre-legislative consultation on its draft Safe and Environmentally Sound Recycling of Ships Bill, 2017, giving effect to the provisions of the Hong Kong Convention. Separately, the Indian Ministry of Shipping announced that all ship recycling facilities that wish to continue operating beyond July 2018 will have to upgrade their infrastructure through the provision of impermeable floor for the secondary cutting.

In the meantime, by the end of 2017 half of all recycling yards in Alang have invested in infrastructural and procedural improvements and have obtained a “Hong-Kong Convention Statement of Compliance” from IACS classification societies. These initiatives by the government and by the industry manifest the transformation that has taken place over the last four to five years in India.

Whereas the eventual entry into force of Hong Kong Convention will ensure that the transformation of India’s yards can remain commercially sustainable in the long term, in the present time the motivation towards (or the discouragement away from) higher standards will be driven by developments in the European Union.

The European Regulation on Ship Recycling was adopted and entered into force at the end of 2013. The Regulation did not require that its provisions would come into effect immediately, but instead it specified a schedule of application, whereby the first version of the European List of approved yards would be published not later than December 31, 2016, whilst E.U. flagged ships would have to: have an Inventory of Hazardous Materials; be surveyed; be certificated; and be recycled in accordance with the new Regulation, from the earlier of the following two dates: (a) six months after the European List of approved yards reaches a combined capacity of 2.5 million LDT; or (b) the end of December 2018.

According to the Regulation, yards located outside the European Union have to apply to the European Commission for an assessment on whether they fulfill the requirements of the Regulation, while yards located in a European Member State are nominated by the Member State for direct inclusion in the European List of approved yards.

After spending an inordinate time developing non-binding and incidentally not particularly helpful guidance for non-E.U. applicant yards, the European Commission invited non-E.U. yards to apply for inclusion in the European List in the middle of 2016. Applications were received from the U.S. (two yards of 72,868 LDT), China (four yards of 1,767,215 LDT), Turkey (seven yards of 450,903 LDT) and India (five yards of 323,497 LDT) of a combined maximum annual capacity of 2.6 million LDT. Further applications can be made at any time.

By the end of 2016 no yards outside the E.U. had been approved, so the Commission fulfilled its obligation to publish the first version of the European List by listing 18 yards located in 10 E.U. Member States with a combined maximum annual recycling capacity of 303,065 LDT. As the definition of capacity is based on the maximum LDT that has been recycled by a yard in any one year during the last 10 years, this does not provide any assurance that all the listed yards are currently operational and with full capacity.

Furthermore, looking at the list of the 18 European yards it is difficult to locate yards known for the recycling of ocean-going vessels. Instead it should be assumed that most of the European yards specialize in the recycling of small boats, domestic shipping and inland waterways shipping, all of these being outside the scope of the Regulation (and of the Hong Kong Convention).

As we arrived at the end of 2017 there was still no news from the European Commission on when the first batch of non-E.U. yards would be approved. To have taken a year and a half to consider 18 applications is extraordinary to say the least, especially when considering the abundant availability of budgets for the consultants who do the actual work leading to the assessment. I can only guess that what prevents the finalization of the assessment are the politics that are being played in Brussels over the issue of beaching.

The European Parliament, the Green Party, the NGO Platform, and at times the European Commission, have all opposed the use of even the best beaching yards for the recycling of E.U. flagged ships, regardless of the dire consequences such an exclusion would have. Interestingly, the data quoted above on the applicant yards shows that the European Commission does not have to rely on any beaching yards in South Asia to reach its capacity target. Approval of the four Chinese (1,767,215 LDT) and seven Turkish applicant yards (450,903 LDT), together with the already approved European yards (303,065 LDT) brings the total capacity to just over 2.5 million LDT.

So the question is what is keeping the Commission from completing this much overdue work of assessing the yards and publishing the list?

Could it be that some practical questions and a dose of realism have finally started troubling the officials, who are realizing that this is not a numbers’ game and that the recycling capacity in the European List ought to be made up of yards that are operational and also keen to compete buying ships for recycling?

Could it be that the Commission has suddenly come across the statistical tables published by the World Steel Association and seen how China has increased its steel production using Oxygen Blown Converters and iron ore, and reduced the use of the Electric Arc Furnace and the reliance on ferrous scrap (EAF from being 15.3 percent of the total Chinese production in 2004, has dropped down to 5.2 percent in 2016)?

Or how China’s imports of ferrous scrap have been reducing (from a record 13.7 million tons in 2009 down to 2.2 million in 2016)?

Or how China’s ship recycling industry has declined from being the leading ship recycling country in 2009 with 31 percent share of the world market, to fourth position in 2016 with a market share of 12 percent (and which is expected to further decline when the subsidy paid by the government for the recycling of Chinese ships is terminated in 2018)?

Quoting from the GMS weekly market report of December 22, 2017: “A silent end to the year in the Chinese ship recycling industry brings with it, perhaps a new dawn where facilities are closed and even government owned Chinese flagged vessels head to sub-continent shores, as state subsidies come to an end next year. One or two of the major / larger facilities (in Xinhui and Shanghai region) will most likely remain open and retain their licenses. However, their price offerings are not likely to be competitive with the Indian sub-continent or even Turkey, as has evidently been the case for a majority of this year.”

Also, quoting from the GMS weekly market report of December 29, 2017: “In the build up to Chinese New Year in February, the outlook for the Chinese ship recycling industry has presently been the bleakest it has been for some time now. Not only are levels positioned at over half of where the sub-continent markets are, but they are also lower than Turkey’s at present.”

Note on December 29, 2017 bulk carrier prices per LDT were as following: India $430; Turkey $285; China $210.

It is common sense that for the Regulation to have a degree of success in its enforcement to European flagged ships it will need a list of approved yards that are competitive and geographically spread. If on the other hand the European List is to be made up of: yards in China that are unwilling to buy ships; yards in Turkey that would quickly reach full capacity; and yards of academic value in Europe that will never recycle a large ocean going ship, then it is pretty certain that the Regulation will lead to reflagging and evasion.

Hopefully these thoughts are keeping the relevant officials in the European Commission awake at night in early 2018.

Source: maritime-executive. 07 January 2018