Responsible ship recycling on the rise globally

23 August 2017

As shipowners become more conscious of how and where their vessels are recycled – and come under increasing pressure from shareholders, NGOs and the media to act responsibly – we are seeing an increase in green ship recycling around the world.

What is green ship recycling?

Green ship recycling involves dismantling or ‘cutting’ ships in a responsible way. It is more akin to overall corporate social responsibility (CSR) than purely being ‘green’, as it focuses not only on the environment but also on other CSR issues such as working conditions and worker safety and environmental awareness.

Jamie Dalzell, Head Trader at GMS Singapore, the world’s largest buyer of ships and offshore assets for recycling, says that one key hallmark of green recycling is having responsible hazardous waste disposal measures in place: “The shipowner identifies when and how the ship was built and where there may be areas of concern in terms of toxic hazardous waste onboard (including asbestos) by developing an Inventory Of Hazardous Materials (IHM) report as per MEPC.269(68) guidelines. Then a ship recycling plan is drawn up by the yard owner utilising IHM and the ship recycling facility plan in order to extract safely all of those items from the ship, rather than cutting them straight off.”

Another example of green recycling is the introduction of concrete cutting surfaces to yards in India with a separate oily water and rain water collection system, where ships are usually cut directly on the beach. Dalzell says: “Previously, a lot of the waste would fall onto the beach. Now there are nearly 40 yards in India that have concrete cutting surfaces, which means waste in the form of oil and paint coatings does not get back into the environment through surface run-off or due to permeability of soil.”

Other innovative working methods are also being introduced. “For example, a yard in Bangladesh has acquired two cranes that are positioned on the concrete cutting surfaces,” says Dalzell. “Rather than workers cutting ships from the top and letting the steel plates fall down, the cranes are now lifting the cut pieces of steel off to be placed on the recycling yard’s impermeable floor for further transport or cutting and melting.” 

China, Turkey and India leading the way

Green ship recycling largely takes place at ship yards in China, Turkey and India that have modern ship recycling facilities and infrastructure in place and meet high standards around environmental and health and safety issues.

India is the latest addition to this list. While India, Pakistan and Bangladesh have long had a vibrant ship recycling industry, cash buyers, shipowners and the media have been putting pressure on subcontinental yards to improve their standards. India has taken the lead in this and carried out significant upgrades to its ship yards – for example, by creating a central waste management system where hazardous waste materials are disposed of.

Christine Mavromichalis, Business Development & Marketing Officer at GMS Dubai, says: “In Alang, India – where the majority of Indian ship recycling takes place – almost 50 yards have now acquired or are in the process of acquiring a Statement of Compliance (SoC) according to the Hong Kong Convention (HKC) for the Safe and Environmentally Sound Recycling of Ships (2009), which means they are recycling vessels according to guidelines set by the International Maritime Organization.”

She continues: “In Bangladesh and Pakistan, the main problem is that recycling facilities are lacking basic infrastructure, so they do not have proper waste management systems in place. This makes it impossible for the ship recycling yards located in those countries to receive a SoC with HKC and perform responsible ship recycling as it has been defined in the HKC. However, significant individual investment has been taking place in Bangladesh by a couple of yard owners that we are working with and we are looking into assisting them further in order to reach a satisfactory level of compliance with the international guidelines. Responsible ship recycling can be done in Bangladesh and we have a dedicated Green Team of PhD. professionals that work closely with those yards in order to educate the workers on health and safety. A lot more work is on the way and we are hoping to see some great progress in the ship recycling industry of Bangladesh emerging soon.”

Mounting pressure on shipowners

As ship yards that offer green recycling facilities need to make significant investments in heavy machinery, equipment and training, shipowners using these yards may receive significantly lower returns for their ships.

Despite this, shipowners are increasingly opting for green recycling as they realise the value of recycling their ships in a responsible manner as part of their overall CSR approach. “We are seeing owners that might have gone to Bangladesh previously to get the biggest returns saying that they only want their ships to be recycled with the highest standards possible,” says Dalzell.

One reason for this is that shipping companies that are publicly listed have shareholders to answer to. Pressure is also coming from external sources such as NGOs and the media.

Dalzell says shipping companies – especially larger firms – are feeling an increasing responsibility to do the right thing and contribute to raising international shipping standards. GMS has been actively endorsing responsible ship recycling among its clients and wider audiences since the very early days of its inception: at international conferences, during round-table meetings and discussions around the globe, through its unique green ship recycling program led by its specially formed green team of experts (for more information visit the GMS leadership website).

The recycling market

The first half of 2016 was all about capesize bulkers. “About 60 capesize bulkers were sold for recycling in the first half of the year,” says Dalzell. “This was down to charter rates dipping to around USD 3,000 per day – whereas they take USD 5-6,000 per day to keep them running.”

2015 had been a big year for newbuilding deliveries, which also had an impact. “More than 100 new buildings were delivered that year and there are only a certain number of cargoes on the water that can keep ships employed, so we had to scrap over 100 capesize bulkers just to keep the status quo,” says Dalzell.

He continues: “The main supply sector at the moment is containers, which has been the most beleaguered sector over the last two years. We saw close to 150 Panamax containers sold in 2016, which is a huge number.”

The age of ships being sold for recycling is also decreasing. “The current age profile of container ships is about 15 years old. In one example, we saw a container ship scrapped that was just seven years old, because it was losing money.”

Looking ahead, Dalzell says that the need to install ballast water treatment systems is going to result in more ships being scrapped because installing a system is going to be very costly and quite a complex process, and owners will be forced to do it when a ship next goes through a dry dock. 

JLT has developed a strong trading relationship with GMS through our ability to provide innovative insurance solutions in this demanding sector. We would like to thank GMS for its contribution to this article.

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