Lloyd’s List – Sanctions suggested to quickly enforce ship recycling improvements

(Written by Liz McCarthy)

22 June 2012 - Persuading breaking yards on the Indian Subcontinent to invest would take too long to bring about significant change, says UK MoD

BEYOND developing regulation, the only fast, effective way to get across the message that international ship recycling yard standards need to be improved is by using enforcement and sanctions, according to a representative from the UK Ministry of Defence at an Informa conference in London.

Commenting on the debate about different methods of dismantling end-of-life vessels, MoD disposal and reserve ships officer Robert Lane said that although the International Maritime Organization’s Hong Kong Convention for the Safe and Environmentally Sound Recycling of Ships, 2009, did not mention beaching — the method used in the Indian subcontinent for around 70% of global demolition volumes — the reality was that “it’s probably not a good method”.

Using British historical references about children working in factories during the industrial revolution and being used for jobs such as cleaning chimneys, he said these situations had only been eradicated — and gradually — not only due to social and cultural development, but also enforcement.

“You can’t force your own will on another sovereign nation,” Mr Lane said. If the ship recycling industry really wanted to create change, and quickly, international sanctions would need to be put in place and shipowners and other market participants should be penalised for breaking them.

“The slow route is the Hong Kong Convention or the fast route is regulation, enforcement and sanctions,” he said. “You can try and do it by persuasion but you’ve got another 20-30 years to go. I heard all this [beaching debate] 10 years ago when we first started talking about it.”

He reiterated a point made by Leyal Ship Recycling head of special projects and external affairs Dimitri Ayvatoglu that Turkey’s sole ship recycling area, Aliaga, which uses slipways and has the greenest facilities globally, was once a beach, as were most ports and maritime centres before development.

Over the years, discussions at ship recycling conferences have questioned who should pay for the investment needed to bring facilities in south Asia up to scratch with the standards required by the IMO convention when it is ratified and entered into force. Mr Ayvatoglu pointed out that Turkey’s improvements were all paid for by the yards.

The country’s industry was, however, supported by its government, which relocated the yards to the industrial area in Aliaga — yards sit between a gas terminal and a refinery — to help with the downstream waste management required to dispose of hazardous materials in a safe and environmentally sound way.

“It’s about recognising the benefits you can get from your own investment,” he said.

The conference had already heard a cash buyer panel questioned about whether they should invest money into ship recycling facilities because they act as the intermediary between an owner selling a vessel for demolition and a breaker purchasing it.

From the cash buyers’ point of view, owners could deal directly with the shipbreakers if they really wanted to, but they choose not to because of the financial risk involved. “We act as insurance,” Wirana Shipping chief financial officer Keyur Dave told Lloyd’s List. “And just like any insurer we don’t make huge margins.”

The suggestion of cash buyers building an investment pot follows years of some industry participants suggesting that shipowners should put away cash to help yards. Considering that some owners already take a hit on price by opting to sell to a green facility that has higher overhead costs, and that once the IMO convention comes into force all companies will have to pay for inventories of hazardous materials to be drawn up for all their vessels and the added regulatory costs involved will build up, it is not surprising that this suggestion does not go down well. One of the main arguments is that owners do not have to invest in shipbuilding yards to ensure those facilities are up to standard, so why should they plough cash into yards that handle end-of-life ships?

This is where the difficulties that this sector faces come to a head. It is the yards and the authorities controlling those facilities that have to make the changes. International regulation can pressure them to act quicker, but the shipping community cannot impose its will on them. The NGO Platform on Shipbreaking often expresses its disappointment that the IMO convention “stops at the yard gates” and does not detail the downstream waste management needed to dispose of hazardous materials such as asbestos and PCBs safely, but this is where the industry moves over from the sea to the land, where the shipping community cannot impose law.

Mr Dave pointed out that he knows shipbreakers who have invested money trying to improve their facilities but because neighbouring yards have not, they are losing out on business due to the price differential.

Until regulation enters into force — still a long way away — there will be companies that want to make every possible dollar from selling end-of-life ships and there are yards that will pay the prices owners are looking for.