So, here we are, amid 2016, with only 6 months remaining until the publishing of the EU-approved list of Ship Recycling Facilities, according to the 1257/2013 EU Regulation (SRR), which came to fill some ‘gaps’ of the 2009 Hong Kong Convention for the Environmentally Sound Recycling of the Ships. Someone would have anticipated that the list, in terms of Mediterranean located yards, would be dominated by the Turkish yards, at Aliaga, in Izmir. These yards, the last 15 years, have dealt – in their “own” ways and methods – with the dismantling of numerous end-of-life-vessels, deriving mostly from EU countries.
Before getting deeper in that issue, let me explain why Ship Recycling is a tremendous opportunity for growth, in multiple sectors. In order to understand this, we have to make clear that Ship Recycling is a Production Process, with certain and specific products that are used as raw material for other industrial sectors. The vast majority of the materials produced during Ship Dismantling Process are re-usable, with only 2% being waste that need to be treated, managed and handled properly, according to the strict EU Waste Management Legislation. From all these recyclable & reusable materials, Scrap Metal should be considered as the key product. This is reflected on how Scrap Prices affect – or manipulate – global ship breaking market. Thus, we have an industrial chain of activities that can help significant opportunities to emerge: Ship Breaking => Scrap Recycling => Steel (esp. Semi-Product) Production. To these, add collateral activities such as the very important – in terms of Environmental Protection – Waste Management.
Moreover, Ship Recycling would contribute also to the growth and revitalization of another Global Key Industry: Maritime Business. Since the beginning of the so-called Crisis, some eight years ago, the Maritime Business has faced enough difficulties that tested harshly its limits and consistency. Rates have been moving extremely low, especially in the Dry Cargo Sector, with Baltic Dry Index (BDI) hitting an all-time low in January 2016. In addition, due to continuous low oil pricing, it seems that it not a good time for Tankers as well as VLCC Rates are well close to fall below breakeven levels. This has led to a very important phenomenon: Lay – Up of Vessels. Vessels that cannot succeed in establishing satisfying charters are put “on hold”, expecting that they could make it back, when – or if – things get better. In latest Posidonia Exhibition, there have been signs that would indicate Lay – Up is not a negligible situation. Alongside to that, consider the fact that, due to low oil prices, some Ship Owners decided to kind-of lay up their vessels, fully laden with oil that are willing to sell when things get better. So, scrapping vessels could lead to a better supply-demand equilibrium, helping Maritime Business stand on its feet. BIMCO President, Philippe Louis-Dreyfus, commenting on BIMCO’s latest market analysis, stated that that “scrapping older ships is not only a good way forward to a better market, it is also an essential measure in favor of the environment and, last but not least, the safety of crews”.
In other words, it’s been a while since the bear is showing off her claws.
But, how could all these apply to EU? Can EU, with its high labor costs and strict legislation, come up to the circumstances and present a viable counter-proposal to Turkish Ship Demolition Yards? What are the facts behind this assumption that could make it feasible?
First of all, it is the location. You need a country that can host Ship Recycling Facilities, located as strategically as Turkey. Furthermore, if that country has already some yards that could facilitate, with little modifications, Environmentally Sound Ship Recycling, it already sounds quite attracting. Could that country be an EU member so that, licensing and permitting of such facilities, would be compliant with EU SRR, by default? And, finally, labor costs. Is there such a country with all aforementioned aspects and, additionally, low labor costs?
Well, there might be one. And it could be Greece. Once more, allow me to explain.
Greece is opposite to Turkey. It is a maritime Global Player. It already has Ship Breaking Yards, of multiple capacities. It is an EU member. It already has a Waste Management Industry. And it’s in crisis. Well, lately, Greece has been the ill cousin of EU, that everyone is trying to save. Unemployment hit a 25% in 2016 and capital controls have caused a relative recession in Greek Economy.
It seems that all questions are relatively answered. Still, the major question remains: Is it possible? Well, it could be possible, under circumstances.
First of all, co-operation is required. It cannot be done, by all means, as an one-man-show. It is vital that all competent stakeholders sit in a Round Table and contribute with their field of expertise. Such stakeholders would certainly be Environmental and Maritime State Authorities, Shipbuilding Companies, Waste Management Companies, Scrap Steel Processing Companies, Ship Owners representatives (especially Short Sea, which are highly active in Black Sea and Med Sea), local and global NGOs, Insurance Organizations, Scientific Institute Representatives, Financing Organizations, Service Providers and Labor Unions. Then, it is the way it will be performed. It should be done using methods that can guarantee compliance with HKC and SRR. Likewise, landing method – that is extensively used in Turkey – should be disqualified and excluded, by default. Instead, as per SRR guidelines, Ship Dismantling should be done using quayside or slide ways method. And it should be done near Scrap Steel Processing Facilities, in order to keep transportation costs as low as possible. There are certain places in Greece, such as Magnesia Region, in Prefecture of Thessaly, that could accommodate or already have such facilities established. With the aforementioned factors, a crucial triplet could be accomplished: zero pollution, zero waste, maximum safety.
Moreover, in terms of economy, it seems that competent EU stakeholders have been identifying certain aspects of the business that could lead to growth. Organizations like SeaEurope (http://www.seaeurope.eu) have been publishing papers, stating that ship recycling is a business opportunity with very good potential, that could create the base for employment and economic growth, opportunities for low-skilled labor and improvement of environment and well-being of workers as well as of the wider society. European shipyards could also contribute to this by adopting a “cradle-to-cradle” concept and creating, thus, a real European circular economy. In addition, it is also a matter of Corporate Social Responsibility (CSR). Europe will never have the capacity to recycle all ships worldwide so there will remain a need to develop third country facilities. However, it can have its share and take advantage of the ample opportunities for an industry on the verge of a breakthrough within Europe.
Finally, as a final drop, take into consideration that Turkey is not an EU member, with certain open political issues – like Northern Cyprus – to take care and has shown a quite unstable political status, from time to time.
So, what is the outline of all this? What could come out of all this? Can EU catch this train that seems to approach?
Whether are all these a Midsummer Night’s Dream or an opportunity to catch the bull by the horns, we will find it out soon enough.