Wall Street Journal – Japan Offers Compromise to EU Ship-Breaking Rules

(Written by Costas Paris)

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13 March 2014 - Japan is proposing a set of global standards to shield ship-breaking facilities in South Asia from tough new European Union regulations.

The country, home to one of the world’s biggest shipbuilding industries, is stepping in amid a long-running battle between the shipping industry and opponents of the ship-breaking trade in places like India, Pakistan and Bangladesh. Rudimentary working conditions in many breaking facilities—yards where old ships are broken apart for scrap—have long raised environmental and safety concerns.

A key worry centers around the practice of “beaching” old ships, essentially running them up onto the beach to allow access to them, instead of moving them alongside piers. Critics say beaching risks environmental contamination and poses excessive hazards to workers.

But it is cheaper than taking old ships apart in specially designed yards. India, Pakistan and Bangladesh allow beaching. The industry in those three countries now employs about one million workers, accounting for over 70% of global ship-breaking capacity.

China and Turkey, two other players in the breaking industry, require piers or extended concrete, covered facilities to be used in their ship-recycling yards. But because of the extra costs involved—as well as lower local demand for recycled material–they offer less to shipowners for the scrap. Chinese and Turkish yards offer $310 per ton of steel compared with about $450 per ton in South Asia, according to U.S.-based Global Marketing Systems, the world’s leading intermediary buyer of ships for scrap.

The European Union has passed legislation requiring a “built structure” with impermeable floors at yards involved in breaking European ships. The legislation is enforced by the European Commission, which is in the process of clarifying the new rules. It plans to publish by the second half of next year a list of yards approved for European breaking.

The Japan External Trade Organization, a government-related body that promotes Japanese trade and investment, meanwhile, is pushing a compromise. Over recent months, it has suggested requiring concrete floors on parts of beaches used to dismantle ships. The flooring would be fitted with drainage facilities, but the recommendations stop well short of requiring piers or extended cemented areas.

“We are working for a compromise where ships will be recycled in a safe and environmentally friendly way in existing yards,” said Jun Kohno, director of ship building for JETRO. Mr. Kohno estimates the cost of such structures in India recycling yards will be around $200 million, and that the Japanese government is prepared to pick up part of the bill. It is presented its proposal to New Delhi and is awaiting a response, he said. Norway, another big shipping nation, has made similar proposals for scrapyards in Bangladesh.

The Japanese initiative is broadly backed by major maritime nations like Greece, Norway and Belgium along with many shipowners associations and the South Asian ship breakers. But it faces strong resistance from Europe’s environmental lobby, headed in this case by the nongovernmental organization, the Shipbreaking Platform, a coalition of 18 environmental, labor and human-rights nongovernmental organizations.

“We want the commission to come up with a list of shipyards that practice the safest methods in ship breaking and clearly disqualifies beaching,” says platform Executive Director Patrizia Heidegger.

If the commission bans beaching it will effectively nullify an existing global proposal—the 2009 Hong Kong Convention—which regulates the scrapping industry. The agreement, which allows beaching, awaits ratification by national parliaments. That process is expected to take about five years.