Since 2014 I have provided The Maritime Executive
with an end-of-year review of developments in the ship recycling industry and
with some thoughts on what we may expect to see in the new year. In preparing
this year’s review I felt that, before setting out my expectations for 2019, it
would be appropriate first to recall the expectations I had for 2018 in my
article of January 7 and to compare these with what actually took place in the
year.
A year ago, I expected that in 2018 we would see a
number of countries ratify Hong Kong Convention and I was bold enough to
suggest that Germany, the Netherlands, Italy, Estonia, Japan and India would
most probably ratify the Convention and bring much closer its entry into force.
With regard to the European Union and its Ship Recycling Regulation I had
suggested that, if the European Commission continued to be ambivalent about
approving yards in South Asia, they would have a lot of sleepless nights because
of the lack of ship recycling capacity for the practical needs of European
shipowners. At that time, I had also wondered about the prospects of China’s
ship recycling industry which had been experiencing a dramatic decline.
Looking back now, the quality of my predictions was
as disappointing as were some of the developments:
(1) Not a single ratification of Hong Kong Convention
was deposited to the Secretary General of the IMO during 2018. The Convention
still has only six contracting States (Belgium, Congo, Denmark, France, Norway
and Panama) whose combined fleet constitutes 21 percent of the world’s tonnage
and 0.04 percent of the world’s recycling capacity (compared to the entry into
force requirement of a minimum of 15 States with no less than 40 percent of the
world’s tonnage and a proportionate recycling capacity).
(2) The European Commission does not appear to have
had any sleepless nights, as they seem to be at peace knowing that from
December 31, 2018 European flagged ships will have to be recycled in one of
only three three yards that the Commission has managed to approve following the
receipt of numerous applications more than three years ago, or in a yard
located in the E.U. Two of the approved yards are in Turkey and one in the
U.S., which as anyone who knows anything will confirm that the U.S. is not a
realistic destination for the recycling of non-U.S. ships. A further 22
facilities in the latest version of the European List are E.U.-based and
luckily for them do not require the Commission’s approval. According to common
knowledge, these facilities are not known for the recycling of ocean-going
ships, and in their busiest year since 2013 they recycled all together only
65,000 LDT, presumably of coastal and inland waterways tonnage.
(3) The Chinese government, having subsidized heavily
its ship recycling industry for the last three to four years, suddenly decided
in April to ban the import of ships for recycling from the end of the year,
this way removing at a stroke of a pen from the international market around one
quarter of the world’s ship recycling capacity and an even larger share of the
so called green ship recycling capacity.
(4) In March, a Dutch court, in the first successful
prosecution of a shipping company under the European Regulation on Shipments of
Waste, found guilty the Seatrade Group and issued heavy fines and a 12-month
professional ban against two directors for having sent four ships for recycling
to Bangladesh, India and Turkey in 2012 without permission. The case, which is
being appealed, sent shockwaves to the shipping industry.
Against these adverse regulatory and legal
developments, the ship recycling industry managed to maintain some progressive
developments. In India, 72 out of 120 yards in Alang are now certificated by
IACS classification societies as compliant with the technical requirements of
Hong Kong Convention. At the end of last year there were 57 compliant yards in
India, while at the end of 2016 there were 20.
PHP Family yard in Bangladesh
Also, the only ship recycling yard in Bangladesh with
a Hong Kong Convention Statement of Compliance so far, the PHP Family, received
its first green vessel for recycling from Vale (VLOC Ore Vitoria), and soon
after its second from Greenpeace (the Rongdhonu, ex Rainbow Warrior II)!
Thereafter the usual NGO politics ensued with the result that Greenpeace issued
a public apology to the Shipbreaking Platform and also the promise “to urgently
adopt an end-of-life ship policy, drafted with the help of the Shipbreaking
Platform, to help ensure such errors do not occur in future.” I believe this
was a wasted opportunity to take an ethical stance and show leadership.
On a more positive note, half of the ships sold by
GMS to Indian yards in 2018 were recycled in accordance with the requirements
of Hong Kong Convention, with Ship Recycling Plans and with Inventories of
Hazardous Materials developed by GMS’s qualified experts.
Having been confronted with the Dutch court’s
decision on the Seatrade case and with the imminent implementation of the
European Regulation on Ship Recycling, more shipowners started paying attention
to the challenges of ship recycling. During the year, GMS facilitated at least
seven visits to India for shipowners who wanted to see for themselves the yards
and the improvements that have taken place in Alang. Also, through the year
shipowners and shipowners’ associations have campaigned for the Hong Kong
Convention’s entry into force (this being the rather unusual situation of the
regulated campaigning for regulation).
What will 2019 bring to our industry? There are 12
Indian and six Turkish yards whose applications are at various stages of review
by the European Commission and its consultants. A first major juncture in 2019
will be around spring time when the European Commission is expected to announce
whether the first two Indian yards that were audited last autumn are approved
and included in the European List, or not. If they are approved, more yards in
India will work hard to also gain approval, and in doing so will make available
more real recycling capacity for shipowners of E.U. flagged ships.
If on the other hand the Indian applications are
turned down, or the Commission’s decision is postponed over convenient
technicalities, then owners of end-of-life E.U. flagged ships will have little
option but to flag-out. This is because the one thing I can predict with
certainty is that the idea promoted by Brussels, that the ocean-going fleet of
Europe can be recycled in European Union yards, will not materialize.
Therefore, looking ahead, there are two European scenarios for 2019: a
successful and effective implementation of the European Regulation or a failed
implementation that leads to evasion.
If the European Regulation is implemented
successfully in 2019 it will disseminate its underlying technical standards
(which are those of Hong Kong Convention) to the wider world and in this way
will support the global acceptance of the Convention’s standards. On the other
hand, a failure of the European Regulation could very well result in accelerated
ratifications of the Hong Kong Convention by European countries who will be
justifiably pressured by their own shipping industries.
Already it has been announced that Germany has
secured ratification through its Parliament, as also has Turkey. It is also
understood that the Netherlands, Estonia and possibly Italy are making progress
towards ratification. Japan’s ratification is expected very soon, and no doubt
other countries may well be getting close to ratifying the Hong Kong
Convention. Furthermore, open registers, such as Liberia and Marshall Islands,
can easily ratify the Hong Kong Convention, and I believe that they will do so
as soon as the shipping industry confirms that the large tonnage of these
registers is not going to hinder the recycling capacity condition of the Hong
Kong Convention’s entry into force from being satisfied.
At the end of the day, the entry into force of the
Hong Kong Convention is ultimately dependent on its ratification by India plus
one other major ship recycling country (Bangladesh, Pakistan and China - who
for the next few years will continue having legacy capacity).
Let us then hope that 2019 will deliver continuing
improvements in the industry and some of the necessary ratifications of the
Hong Kong Convention.
Source: the maritime-executive.
25 December 2018
