Lloyd’s List – Industry divided over Brussels moves to regulate recycling

(Written by Liz McCarthy)

28 February 2013 – EARLIER this month, the International Chamber of Shipping voiced concern about the European Commission’s proposal to regulate ship recycling, saying that it could undermine the International Maritime Organization’s Hong Kong Convention.

The ICS’ main gripe was the proposal for a fund that operators of European Union-flag vessels would pay into to ensure their ships were recycled to EU standards at the end of their working life.

“The ulterior motive of the European Parliament seems to be a wish to create work for ship-recycling facilities in Europe,” the ICS said.

And it is not just the ICS that is talking about the fund.

“Everyone has big questions about the financial instrument, because inevitably it will not be as transparent as anyone would like,” Sea2Cradle managing director Tom Peter Blankestijn tells Lloyd’s List.

“It’s a dilemma of using, say, candy or using the stick as your instrument: are you going to punish those that do not follow the mandatory structure or are you going to tempt them?

“Funding is difficult: who is going to pay, who is going to pay when, who is going to hand over the money to whom and at what time and under what conditions.”

Others in the ship recycling industry also have concerns that talk of the fund is a distraction from having serious conversations about the content of the EC’s proposal.

“It is a little worrying that possibly some of the technical aspects within the original draft are being ignored,” says Lloyd’s Register ship recycling lead specialist Robin Townsend, who heads up the UK-headquartered class society’s involvement in the ship recycling sector.

One point that seems certain is that some form of EU regulation on ship recycling will enter into force well ahead of the IMO’s Hong Kong Convention for the Safe and Environmentally Sound Recycling of Ships, 2009.

“I believe that the EU regulation will come significantly before and it will have a sudden impact on the industry,” Germanischer Lloyd lead auditor ship recycling Jens Rogge tells Lloyd’s List.

“Unlike the Hong Kong Convention it will not have this long time-frame in between when it is published and when it enters into force. There will only be a short time before the requirements become mandatory.”

Classification societies have been creating inventories of hazardous materials — a requirement of the Hong Kong Convention guidelines and of the EC proposal — for existing and newbuilding vessels as and when requested by shipowner clients.

However, if a European regulation is passed through parliament at speed, shipowners could need to audit their entire fleets, which would stretch the global capacity of hazardous material experts and class societies.

In addition to inventories of hazardous materials, vessels flying an EU flag would also have to be dismantled in sites that demonstrate safe and environmentally sound practices, to requirements developed along convention guidelines.

However, Brussels has suggested additional measures that require breaking yards, regardless of location, to demonstrate that they meet these standards. In other words, only approved sites would be able to dismantle EU-flag vessels.

Shipbreakers such as Bangladesh-based PHP Ship Breaking and Recycling Industries director Mohammed Zahirul Islam argue that the European proposal is “foolish”.

He argues that whereas the IMO convention promotes the need to improve facilities in the Indian subcontinent, where around 70% of ships sold for demolition are dismantled, the EU’s black and white list would be counterproductive.

“Even if the EU doesn’t send ships here, there will be a lot of other countries that will send them to Bangladesh, so if they ban it then we will not need to listen to them,” Mr Islam says.

“Over the last four of five years the difference that we have made in the yards is quite remarkable and yes, we need to improve further but look at it like this — it seems like every day there are many road accidents in Bangladesh. So is the EU going to stop us using vehicles on the road?

“You have to look at how you can educate and improve rather than just stopping it all together.”

However, other ship recyclers view the EU regulation more positively.

In October 2012, two officials from the European Commission visited Turkey to meet officials in Ankara, the capital, and inspected the country’s ship recycling yards in Aliaga.

“What came out of this was that it appears Europe is very happy to have the support of Turkey to provide capacity if and when this new European regulation comes into place,” says Leyal Ship Recycling head of special projects and external affairs Dimitri Ayvatoglu.

“I think it will be beneficial for European vessels, as well as Turkey’s ship recyclers.”

Ironically, when industry meetings have discussed funds to improve shipbreaking sites, Turkish recyclers have pointed out that they have invested their own profits to improve standards at their facilities over the last couple of decades without help from anyone else.

“The trouble of the pricing mechanism is that the green element is in the total sales price of the vessel; it’s not visible,” says Mr Blankestijn.

“I’ve always said that the price of steel and metals in a vessel — like aluminium and copper — fluctuate with the commodity market while the cost of waste disposal of other materials in the ship is more or less a flat line.

“The two of them are mixed at the moment in the shipbreaking industry, so it is unclear what the cost of the green element is.

“If you were able to make that more transparent in the pricing mechanism, you [could] see who is paying for what.”

That, says Mr Blankestijn, would shed a whole new light on discussion of funding.