Ship detention highlights need for legal framework for ship recycling:

Introduction

On June 6 2014, after receiving an alert from the Shipbreaking Platform – a non-governmental organisation comprising a coalition of environmental, human rights and labour organisations – the Flemish regional government in Belgium detained the Liberian-flagged, 45,500 deadweight tonnage car carrier Global Spirit (built in 1987) in Antwerp for alleged non-compliance with the EU Waste Shipment Regulation (1013/2006) and because it had been notified that, having reached the end of its service life, it would be beached at Alang in India (which is not a member state of the Organisation for Economic Cooperation and Development (OECD)). The vessel was loading a cargo of second-hand cars for a final voyage when it was arrested.

The Global Spirit detention was not a clear-cut violation as, on departing Europe, it was destined to travel to a West African port with cargo – not, as was alleged by the Shipbreaking Platform, to India for recycling. The issue was not submitted to court, but the Flemish government reached an agreement with the owners which guaranteed that the vessel would be dismantled and recycled in Turkey. The vessel was released and sailed on June 25 2014.

In a subsequent press release the Flemish government stated that the Waste Shipment Regulation was not the appropriate instrument through which to detain the vessel and emphasised the importance of the Belgian government's commitment to speed up its ratification of the International Maritime Organisation (IMO) Hong Kong International Convention for the Safe and Environmentally Sound Recycling of Ships. The ordeal highlights the interplay between EU regulations and international conventions on the matter of ship recycling.

Shipping and hazardous waste regulations

Ships that constitute waste and are subject to trans-boundary movement for recycling are regulated by the Basel Convention on the Control of the Trans-boundary Movements of Hazardous Wastes and their Disposal 1989 and the Waste Shipment Regulation. The Waste Shipment Regulation implements the Basel Convention as well as an amendment made to the convention in 1995 (referred to as the 'ban amendment'), which has not yet entered into force at international level and which bans exports of hazardous waste to countries that are not members of the OECD. Such ships are generally classified as hazardous waste and are thus prohibited from being exported from the European Union for recycling in facilities in countries that are not members of the OECD.

The mechanisms for monitoring the application and enforcement of existing EU and international laws are not adapted to the particularities of ships and international shipping. Inter-agency cooperation between the International Labour Organisation, the IMO and the secretariat of the Basel Convention has resulted in an agreement on the introduction of mandatory requirements, at global level, aimed at ensuring an efficient and effective solution to unsafe and unsound ship recycling practices – the Hong Kong Convention.

However, legally accessible ship recycling capacity in OECD countries for ships flying the flag of an OECD member state is insufficient. Safe and environmentally sound ship recycling capacity in non-OECD member countries is sufficient to treat all ships flying the flag of OECD member states and is expected to expand further by 2015 as the result of actions taken by recycling countries to meet the requirements of the Hong Kong Convention.

Hong Kong Convention

The Hong Kong Convention was adopted on May 15 2009 under the auspices of the IMO. The convention will enter into force 24 months after ratification by at least 15 states representing a combined merchant fleet of at least 40% of the gross tonnage of the world's merchant shipping and whose combined maximum annual ship recycling volume during the preceding 10 years constituted at least 3% of gross tonnage of the combined merchant shipping of those states. The convention covers the design, construction, operation and preparation of ships with a view to facilitating safe and environmentally sound recycling without compromising ship safety and operational efficiency. It also covers the operation of ship recycling facilities in a safe and environmentally sound manner, and the establishment of an appropriate enforcement mechanism for ship recycling.

EU Ship Recycling Regulation

The new EU Ship Recycling Regulation (1257/2013) – which came into force in December 2013 and appears to follow the Hong Kong Convention closely – is intended to facilitate early ratification of the convention both within the European Union and in third countries by applying proportionate controls on ships and ship recycling facilities.

The convention provides explicitly for parties to take more stringent measures consistent with international law in regards to the safe and environmentally sound recycling of ships, in order to prevent, reduce or minimise any adverse effects on human health and the environment. Taking this into account, the Ship Recycling Regulation should provide protection from the possible adverse effects of hazardous materials on board all ships calling at a port or anchorage of a member state while ensuring compliance with the provisions applicable to those materials under international law. According to the regulation's preamble, in order to monitor compliance with the requirements relating to hazardous materials under the regulation, member states should apply national provisions to implement EU Directive 2009/16/EC. At present, port state control inspectors are tasked with both the inspection of certification and active testing for hazardous materials, including asbestos, under the International Convention for the Safety of Life at Sea. The Paris Memorandum of Understanding on Port State Control provides a harmonised approach for these activities.

The preamble states that the Ship Recycling Regulation is also intended to:

Reduce disparities between operators in the European Union, OECD countries and relevant third countries in terms of workplace health and safety and environmental standards; and

direct ships flying the flag of an EU member state to ship recycling facilities that practise safe and environmentally sound methods of dismantling ships instead of sub-standard sites, as is the existing practice.

This would therefore increase competitiveness in safe and environmentally sound recycling and treatment of ships among ship recycling facilities in member states. The establishment of a European list of ship recycling facilities fulfilling the requirements set out in this regulation would also contribute to these objectives and to better enforcement by facilitating member states' control over to-be-recycled ships that fly the flag of the member state in question. For ship recycling facilities in a third country, the requirements should ensure a high degree of protection of human health and the environment that is broadly equivalent to that in the European Union. Ship recycling facilities that do not meet these minimum requirements should therefore not be included in the European list.

Overlap with Waste Shipment Regulation

In order to avoid overlap, it is necessary to exclude EU member state-flagged ships that fall under the scope of the Ship Recycling Regulation from the scope of the Waste Shipment Regulation and EU Directive 2008/98/EC. The Waste Shipment Regulation applies to shipments of waste from the European Union, subject to exclusions for certain categories of waste where an alternative regime applies. The Ship Recycling Regulation subjects ships within its scope to controls throughout their lifecycle and aims to secure recycling of these ships in an environmentally sound manner. It is therefore appropriate to specify that a ship subject to the alternative control regime under the Ship Recycling Regulation should not be subject to the Waste Shipment Regulation. According to the preamble of the Ship Recycling Regulation, ships covered by neither the Hong Kong Convention nor the Ship Recycling Regulation, as well as any waste on board a ship other than operationally generated waste, should continue to be subject to the Waste Shipment Regulation and to Directives 2008/98/EC and 2008/99/EC, respectively. It has also been acknowledged that ships continue to be subject to other international conventions to ensure their safe operation at sea during the operational part of their lifecycle.

Comment

The Waste Shipment Regulation and the Basel Convention (on which this regulation is based) were never intended to apply to international shipping or ships that are scheduled to be recycled. While the Waste Shipment Regulation is good for controlling the export of hazardous waste, it becomes flawed when regulating end-of-life ships. The relevant regime applicable to international shipping is the Hong Kong Convention. Although this instrument has not yet entered into force, it is fully supported by the international shipping industry and provides a sounder and far more relevant basis to determine whether a shipping company fulfils its responsibilities to ensure that redundant ships are recycled in a safe and environmentally sustainable manner. This compelled the European Parliament and the EU Council to develop the new Ship Recycling Regulation. Article 27 of this new regulation, once fully applied, excludes EU-flagged ships from the requirements of the Waste Shipment Regulation but does not exclude non-EU-flagged vessels. As Nikos Mikelis, former head of the IMO's maritime pollution prevention and ship recycling section, has stated:(1)

"Owners of non-EU-flag ships intending to recycle their vessels now or in the future will have to walk a tightrope when trading in EU ports so as not to fall prey to the activists, who see their role in enforcing the Ban Amendment to ship recycling and also in banning beaching."

For further information on this topic please contact Dirk Noels at Kegels & Co by telephone (+32 3 257 1771), fax (+32 3 257 1474) or email (dirk.noels@kegels-co.be). The Kegels & Co website can be accessed at www.kegels-co.be.

Endnotes

(1) "Vessel arrest highlights need to ratify Hong Kong Convention on ship recycling", Tradewinds, June 13 2014.

Source: international law office. 3 September 2014

http://www.internationallawoffice.com/newsletters/detail.aspx?g=1ad7f7e1-4cca-4df6-8774-9c08ca377f73

GMS weekly report on Pakistan ship breaking industry for WEEK 35 of 2014:

Another week as top market performers saw Gadani buyers pick up one or two more interesting sales.

As well as talk in the market of a VLOC and suezmax tanker having being sold at very firm rates (with intention of a Pakistan delivery) over USD 500 per LT LDT, there was at least one other market sale that could be reported.

The smaller general cargo and tween vessel SOLEIL (2,382 LDT) sold for USD 453 per LT LDT this move being surprising due to the fact that it is usually India picking up such units due to the Pakistan aversion to smaller LDT units.

Source: steel guru. 2 September 2014

http://www.steelguru.com/international_news/GMS_weekly_report_on_Pakistan_ship_breaking_industry_for_WEEK_35/348185.html

GMS weekly report on Turkey ship breaking industry for WEEK 35 of 2014:

Yet another week goes by with less than a handful of Vessels arriving at the shores of Aliaga, leaving demand un-quenched. To add to the dithered state of affairs, steel prices weakened this week by about USD 8 per tonne overall.

The only silver lining to the dark cloud was the Turkish Lira that ended the week on a marginally stronger note at TRL 2.16 against the US Dollar (compared to 2.18 where it stood at the week's opening).

The current price gap between the Indian sub-continent markets and Turkey justifies only smaller vessels (of about 5,000 LDT and less) that are opening up in the Med to be potential Turkish candidates and that is only if no positioning cargos are found to bring prospective vessels across the Suez Canal.

As it has been the case since pre-Ramadan, Turkish end-buyers will need to remain patient for some time longer.

Source: steel guru. 2 September 2014

http://www.steelguru.com/international_news/GMS_weekly_report_on_Turkey_ship_breaking_industry_for_WEEK_35/348183.html

GMS weekly report on China ship breaking industry for WEEK 35 of 2014:

Desperately low steel prices saw quotes for scrap ships sink even further in China, in what remained another hopeless week. Prices are firmly entrenched in the mid to high USD 200s per LT LDT as the price differential for vessels widens to USD 200 per LT LDT with the sub continent markets.

Logically, as long as the state supply of tonnage eligible for the government subsidies continues, these low prices will not be of any worry to Chinese recyclers.

However, a complete absence of international tonnage heading to Chinese yards is a worry to the recycling industry at large, in what has been an extremely bleak year so far for the Chinese market.

Source: steel guru. 2 September 2014

http://www.steelguru.com/international_news/GMS_weekly_report_on_China_ship_breaking_industry_for_WEEK_35/348180.html

How do you safely break up an 'old lady'?

What's the best way to dispose of an "old lady"? Should she be dumped on a beach and broken up by rough hands in terrible conditions or should she be taken in a more sedate fashion to a reputable place to be dismantled in an orderly fashion?

The question is being debated in the shipping industry where an "old lady" is the usual term for a vessel which has come to the end of its days.

One of the world's biggest cargo companies has just decided to stop sending its ships to be broken up on Bangladesh's beaches where ultra-cheap labour does the job in tough, dangerous conditions.

It is back-breaking, dangerous work done by bare-footed people with virtually no medical help for the injured, according to one body campaigning for better conditions in Bangladesh - and one in ten of the workers is under the age of 18.

An average of two workers a month die on the beaches of Chittagong alone, says the group, Young Power in Social Action - and in April this year, four died from carbon monoxide poisoning.

But the difficulty is that sending old vessels to yards with higher standards of safety is expensive - and it may also deprive the Bangladeshi workers of even the pittance they currently earn in wages.

The board of the German company, Hapag-Lloyd, one of the world's biggest operators of container ships, has just had that debate and is switching the disposal of its old ships from Bangladesh to China - where labour standards and costs are higher.

Executives balanced the higher cost against the morality of using low-cost workers in appalling conditions and opted for a breaker's yard near the mouth of the Yangtze in China instead.

"We decided we didn't want to use the beaches for scrapping our vessels," says a spokesman.

Workers earn around $4 a day for breaking up a ship

Boom or bust

It is a dilemma. The switch pushes up the cost by up to $2m (£1.2m) a vessel, depending on how far the ship needs to travel to the final yard and whether it could take a useful cargo on the way - for example, ships sailing to China return empty containers, and that's a lucrative cargo.

When a shipping firm decides a ship is no longer economic, it either sells the vessel to the secondary market - in other words another company - or directly to the breaker's yard. What the buyer of the ship does then depends on the state of the world economy.

In boom years, demand to extend the life of ships is high so fewer get broken up. When demand for shipping is slack, the glut of vessels means they have a relatively higher scrap value, so they usually end up getting beached at high tide in Pakistan, India or Bangladesh where 70% of old ships are broken up.

The switch to higher cost disposal means that the beaches of Bangladesh, particularly at Chittagong, the country's industrial centre on the coast, may get less business.

Western firms should invest in proper breaker's yards in Bangladesh, say some

'They get sick and die'

One of the people there who is campaigned for better standards is not mourning the loss of the contracts. Muhammed Ali Shahin told the BBC that the labourers worked in terrible conditions, and the pay for work that kills simply can't be worth it.

"They earn about $4 a day but for the danger of the job, it's nothing because they get sick and they die. They have poison in their bodies because of the pollutants."

He thinks the better solution would be for Western companies to invest in proper ship-breaking yards in Bangladesh.

"Shipbreaking should be taken off the beach and ships should be pre-cleaned before they arrive here," he says.

"Worker rights are violated. They work 12 to 16 hours a day. They aren't provided with safety protection. They dismantle ships without masks and with hammers. They inhale toxic fumes. Workers are dying virtually every day.

"Environmental rights are violated. The ships are being cut on the beach and beaches aren't made for this kind of business so there are toxic materials in the ocean."

The real difficulty is the poverty of the economy.

For a rural peasant in the north of Bangladesh, the move south to the coast and jobs like ship-breaking is attractive - low-paid, back-breaking work on a beach is better than even lower paid back-breaking agricultural work.

Bangladesh's economy depends on the steel taken from scrapped ships

Decision dilemma

It's not just the desperate labourers in Bangladesh who lose income when the work goes to China, but the whole economy. In the industry, ship-breaking is called re-cycling - the aim is to take everything from a vessel which can be re-used.

Nearly all a ship's structure is made of steel and Bangladesh is dependent on this as a source of steel for its domestic industry.

This obviously presents a dilemma for Bangladesh - higher labour standards may mean higher costs and so less business. The dilemma for the companies is different. Should they always go for the lowest costs, as some share-holders might expect?

Hapag-Lloyd and also Maersk before it, has decided that higher labour and environmental standards justify a bigger hit to its bottom line. Firms are also aware that using ultra-cheap labour can mean bad publicity and "reputational damage" for a company.

The industry thinks that imposing internationally acceptable standards is the way forward, so that a series of conventions have been agreed to stipulate the minimum standards acceptable, and so remove the advantage some companies have by using the cheapest labour.

Shipbreaking employs thousands in Bangladesh, despite the dangers

Human cost

But whatever the economics of ship-breaking on the beaches of Bangladesh, you can't doubt the human cost.

The pressure group, Shipbreaking Platform, which campaigns for better standards cites the case of 16-year-old Khorshed Alam who was crushed to death when a metal plate fell on him.

He had just left school to support his family even though his pay was less than $3 for a 12-hour day.

Now all his family has is the grief - and the memory of a teenager doing a man's job in appalling conditions.

Source: BBC. By Stephen Evans. 31 August 2014

http://www.bbc.com/news/business-28857283