Tradewinds – Business as usual despite EU arrest of scrap vessel

(Written by Jonathan Boonzaier)

29 August 2014 - Cash buyers report few disruptions to deals despite the arrest of a scrap-bound car carrier by the European Union three months ago in a move they believe was a one-off incident of political posturing made at the instigation of green lobbyists

When Belgian authorities, acting under the auspices of the European Union (EU) Waste Shipment Regulation, arrested the 45,500-dwt car carrier Global Spirit (built 1987) in early June, the shipping industry was severely shaken.

The Liberian-registered vessel, controlled by the World Car Carriers joint venture between Japan’s Mitsui OSK Lines (MOL) and Nissan Car Carriers, was supposed to drop off a cargo of vehicles in Africa and then head to India, where it would have been beached for recycling at Alang.

The arrest signalled that all ships in European waters would thus be bound by EU regulations on scrapping, no matter the owner or flag. World Car Carriers resolved the issue by selling the ship to an EU-approved recycling yard in Turkey for a lower price.

“In the case of the Global Spirit, the owners probably would have been able to overturn the arrest of the ship by arguing in a court that as a foreign-flag, non-European-owned ship, it was not subject to the EU regulations. I think the owners decided not to be involved in what would have been a high-profile court hearing, and sent the ship to Aliaga to resolve the matter quickly,” said a leading cash buyer who asked not to be identified.

The cash buyer tells TradeWinds that fears ships in European waters cannot be sold to non-EU approved recycling facilities, such as those on the Indian subcontinent, have proven to be unfounded. He claims that deals on ships calling at European ports are still being done but, in the case of high-profile owners who are concerned about their corporate social responsibility (CSR) image, they are only concluded once the vessel has left European waters, so that they are not targeted by non-governmental organisations (NGOs).

Other low-profile owners, particularly private companies who face less in the way of reputation problems, do not appear too concerned about quietly selling their ships that are in European waters to recycling yards outside the EU’s domain.

The cash buyer believes this is because it is unlikely that the NGOs will target their tonnage. “The NGOs are not stupid. They target only high-profile owners who they know are very image conscious. They know that they would not get the same result if they targeted a ship owned by a company that had little concern about public image,” he argued.

Similarly, the cash buyer believes that the EU itself does not want to embark on a witch-hunt against demolition-bound tonnage. “Europe does not have enough recycling capacity. EU authorities only reacted against the Global Spirit because of NGO pressure. It was a political statement. I don’t think that it plans willingly to take action on other ships unless there is more instigation on the part of the NGOs,” he said.