Wall Street Journal – EU Sets Rules for Ship Recycling Without Banning Beaching

(Written by Costas Paris)

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27 June 2013 - The European Council adopted a long-debated regulation on the lucrative ship-recycling business that sets strict requirements on environmental standards but doesn’t prevent ships from being recycled on South Asia beaches.

“I didn’t get everything I wanted; there is no specific mention that beaching is banned. But the standards agreed will exempt South Asia yards from the list [at which] European flag ships can be recycled,” said Carl Schlyter, of Sweden’s Green Party, who spearheaded the European Parliament’s push for stricter recycling practices.

The European Council, which represents the heads of European Union member states, opposed a ban on beaching amid pressure from South Asian governments.

Asian scrapyards generated $6.3 billion from beaching last year, according to shipping-industry data provider Lloyd’s List. European shipowners sent a record 365 vessels to South Asia’s beaches last year.

Council officials said the new regulation encourages shipyards in India, Bangladesh and Pakistan—where ships are pulled on sandy beaches and broken up by hand—to improve their methods to avoid toxic spills. But they don’t expect European vessels will stop using South Asia recycling yards.

“It’s a compromise that motivates yards to do a cleaner job. That’s it,” said an official from a European country with a significant maritime presence.

The three South Asian countries account for more than 70% of the global ship-recycling industry. Yards in those countries pay shipowners $410 for a ton of steel, depending on the grade, while competitors in China and Turkey pay $300 to $340 a ton.

The legislation calls for recycling to be conducted using fixed structures, impermeable floors and effective drainage systems to prevent spills. But it doesn’t propose specific penalties on shipowners for recycling their vessels at yards that don’t have such facilities.

“The penalties, which may be of a civil or administrative nature, should be effective, proportionate and dissuasive,” the legislation says.

Mr. Schlyter, of the Green Party, said he would have preferred more specific language on penalties.

The EU legislation is in line with an existing global proposal—the 2009 Hong Kong Convention—that regulates the scrapping industry by establishing standards that are safe for workers and environmentally sound. That agreement awaits ratification by national parliaments, which is expected to take about six years.

The EU measure “is reasonable and workable and very much in line with Hong Kong Convention, which is the only route to global regulation for ship recycling,” said Nikos Mikelis, a nonexecutive director of Global Marketing Systems, a middleman in the ship-breaking industry. Mr. Mikelis, a former executive of the United Nations’ International Maritime Organization, helped draft the convention.

“My greatest relief is that Europe did not make the grave error of banning the beaching of European-flagged ships,” Mr. Mikelis said.