SHIP RECYCLING: BREAKING NEWS & LISTING THOUGHTS

Wish you a Happy and prosperous New Year. May the New Year be a break-ship – errr, sorry – a breakthrough year. So, 2017 is here. And, obviously, 2016 is gone. So is the 31st of December. Hm, let me think, did I have something to wait that day? Oh yes, the List of EU-Approved Ship Recycling Facilities. In fact, it was published out a little bit earlier. On December 19th, to be exact. Along with that, certain changes came into force, shaping a bit the overall picture of Ship recycling Business. Maybe it would be good to share some thoughts.

Initially, we should point the following, as posted by EU: “…From a date set in the Regulation to fall between mid-2017 and 31 December 2018, large commercial seagoing vessels flying the flag of an EU Member State may be recycled only in safe and sound ship recycling facilities included in the European List of ship recycling facilities. The List was first established on 19 December 2016. It will be updated in the future through Implementing Acts to add more compliant facilities or to remove facilities which have ceased to comply…” (http://ec.europa.eu/environment/waste/ships/).

Going through the awaited List, there are some notices to be made that cannot be missed. First of all, all EU-approved Ship Recycling Facilities are located within EU territory. While most of the Ship Recycling Activity takes place at Asia, either in India-Pakistan-Bangladesh or in Turkey. Turkey is the only Ship Recycling country that has physical borders with EU. It also has an EU-membership potential. But, definitely, it is not an EU member. Still, it receives quite a share of EU-flagged vessels that are recycled. In a previous post (https://www.linkedin.com/pulse/ship-recycling-med-sea-scrapping-ships-building-stefanos-i-magoulas/?trk=pulse_spock-articles), I have pointed that EU could also claim at least a portion of that share, by investing in Greek Ship Recycling Facilities. However, the point lies within the absence of Turkish Ship Recycling Yards from the List.

Another striking absence is that of Southeastern Asian Ship Breaking Yards. It is interesting if we see it in contrast to the big capacity facilities. First, let’s define big capacity. To my eyes, it should be the conjunction of dimensions and LDT and that is because you cannot just break the ship, you have also to adequately manage your products. So, in the List, such facilities are all located in UK. Which exits EU within the next years aka BR-Exit. Could that have consequences in Ship Breaking business? What will be the labor costs compared to that of Southeastern Asia Ship Breaking Yards? Are they planning to be a competitive and feasible choice for all these ships working in Atlantic as well as in Baltic and North Sea (Rigs, FPSOs, FSUs, Support Vessels, Shuttle Tankers etc)?

Also, I think it is interesting the fact that all non-EU Ship Recycling/Breaking Yards – Southeastern Asia, Chinese & Turkish – have chosen the path of Hong Kong Convention compliancy. Working closely with recognized organizations such ClassNK and IRClass, they all have acquainted HKC Compliancy Statements. Under a more alerted view, this could be taken as an alliance of the Rest. EU has the List, they have HKC Compliancy Statements. And competitive pricing also. Ok, they also have capacity. To recycle big ships. Autobots VS Dicepticons? True OR False? If true, who is who? We shall see.

Another point is that of overall LDT of the approved facilities status. Theoretically, working in full capacity, they could reach a total of almost 1.2mil LDT, during 2017. Until now, accumulatively, they had a top of 300k LDT. The Ship Recycling Regulation (SRR) requires, to enter into force, either six (6) months after the combined maximum annual ship recycling output of the ship recycling facilities included in the European List constitutes not less than 2,5 million light displacement tonnes (LDT) or December 31st, 2018. So, to be realistic, the earlier it could be into force could be mid-2018. And this is quite optimistic because it would require approved SR facilities to work in full capacity plus new, big-capacity yards enter the List. So, we have at least a year and a half before SRR entering into force.

To the above, there is one more point that it seems to be more urgent of all. This is Inventory of Hazardous Materials (IHM). Now that the List is published, every EU-flagged vessel meant to be recycled should have a valid Inventory onboard, prior to recycling, according to SRR. This causes some thoughts to emerge. SRR mentions clearly that “…be verified either by the administration or a recognised organisation authorised by it…”. Up to date, verification was performed by Classification Societies. Could competent Administration stand up to it and consist of an competitive alternative? You could claim that there is no need for that. I will demur by saying three words: Short Sea Shipping. Let’s break it in pieces. In Greece, for example, there is a quite significant fleet of Greek flagged vessels, operating in Greek seas. Not all brand-new. So, retrofitting costs might occur eventually for them, along with forecoming changes (BWM Convention, Emission Control Legislation). So, you have two choices: recycling OR lay-up and recycling. Either ways, there is great possibility a big number of ships to end up in facilities. Probably, Turkish, as it happened until now. It would be quite convenient if Greek Flag State could also help in the verification of IHMs. Moreover, if they choose lay-up – which is a parallel reality as it happens very actively in Greece – Flag State could be a very convenient IHM Verification alternative solution. To these ships, add all these abandoned and/or confiscated vessels in Greek waters, which all fall under Wreck Removal Nairobi Convention. What happens to these when it comes to their recycling? Once more, Greek Flag State could be a very convenient IHM Verification alternative solution. To underline the importance of IHM for EU and EU-flagged vessels, European Maritime Safety Agency (EMSA) proceeded to the publication of its Best Practice Guidance on the Inventory of Hazardous Materials regarding both IHM development and maintenance in the context of the EU Ship Recycling Regulation and Monitoring & enforcement in the context of the EU Ship Recycling Regulation.

Briefly, with the publication of EU-approved Ship Recycling Facilities List, a series of thoughts occurred and more are still to rise. None of those are to be neglected as all components have their role in the final current with IHM, Recycling Capacity, Waste Management and labor costs are some of the issues to be dealt with.

To conclude, it is sure that there is still work left to do. Surely, it will not be easy for things to balance, reaching to a point of equilibrium. But, it is also sure that thoughts must be expressed in order to provoke a productive dialog to start so that more business opportunities are created for all stakeholders. Working in harmony, up to a critical digestion point, could be a viable solution to solid economies. Let’s hope that everybody is willing to do so.

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