What is the link between cash buyers and green ship recycling? writes Jamey Bergman for Riviera.
Promoting green cycling principles
“Most of us have been promoting green recycling principles for a decade or more,” says Best Oasis vice president Yiannis Kourkoulis
Mr Kourkoulis, whose cash buying company sprang from the diversification plans of the first recycling yard in India to be certified under International Maritime Organization’s (IMO) Hong Kong Convention (HKC) rules, says the opinion of cash buyers of vessels destined for demolition is often a negative one, and that is unfair.
Best Oasis’ parent company, Priya Blue Industries’ certification meant Priya Blue Industries fulfilled the criteria of the Hong Kong Convention regulatory framework that was developed through international, multilateral negotiations within the United Nations’ (UN) shipping body. The yard has also been audited under a different, often described as stricter, set of regional regulations from the European Union (EU) called the EU Ship Recycling Regulations (EU-SRR). This audit was performed with the intention of determining whether the yard can be on the EU’s so-called whitelist of ship recycling facilities where EU-flagged vessels are allowed to be broken apart and sold for scrap.
The EU has not accepted any south Asian yards on its whitelist, in large part due to the Ban Amendment in its Basel Convention. The Basel Convention prohibits the export of hazardous wastes from EU member states to countries outside of the EU, Organisation for Economic Cooperation and Development countries and Liechtenstein.
“The European Union has to focus more on trying to see options outside of the list they already have, be more realistic in its approach and accept the beaching method. I know it is trying to do its best, but the ship recycling facilities in India have developed and yards have also invested heavily in infrastructure, safety training and hazardous material management. Hopefully, there is a way to find these facilities a place on the list before the predicted wave of vessels set for demolition starts to hit recycling facilities,” Mr Kourkoulis says.
15,000 vessels will be scrapped
BIMCO has recently predicted that the next 10 years, from 2023-2032, will see some 15,000 vessels scrapped, doubling numbers as compared with the previous 10 years. This remains a virtual certainty given the number of ageing vessels in the global fleet and the increasingly stringent environmental regulations the same fleet is facing.
Currently, most of the active recycling yards in India have been certified as compliant with HKC, according to Best Oasis’ figures. And in a major move for the industry sector, Bangladesh has officially ratified the Hong Kong Convention, injecting some much-needed momentum behind the unadopted set of regulations that had been mouldering for years with little uptake among some of the sector’s largest players.
Whether Bangladesh’s ratification alone will make a difference for the percentage of vessels currently recycled under what Best Oasis considers green, or sustainable, recycling conditions remains to be seen, according to Mr Kourkoulis.
Major flag states like the Marshall Islands and Liberia still have not ratified the HKC, and – given their regulatory control over a huge percentage of the global fleet – their ratification would throw significant weight behind the push to require consistent minimum standards to protect workers in the facilities where vessels are taken apart.
Bangladesh’s ratification
“Although we are still waiting for verification from Marshall Islands or Liberia for this to become mandatory worldwide, Bangladesh’s ratification is very important,” Mr Kourkoulis says.
“Because of Bangladesh’s ratification, they will have to have recycling facilities in accordance with HKC. If we have both India and Bangladesh in accordance with HKC, we have only Pakistan left – which can’t operate due to economic issues at the moment – among the major south Asian players. If we take into consideration that HKC and green practices are gaining more and more interest each year, and keep in mind we have more facilities using green practices, then I believe green recycling activity will increase over the next few years,” he says.
Best Oasis estimates around 40% of the vessels it buys for demolition each year wind up in a yard that adheres to green or sustainable recycling practices. “A bit more than one in three vessels, nowadays, are sold for green recycling practices,” Mr Kourkoulis says, noting the figure is approximate and varies year to year.
But participation in green or sustainable recycling practices within the shipping industry, between vessel types and even within a specific segment, can vary greatly, according to Mr Kourkoulis. With a price spread of US$50 per light-weight tonne between HKC-compliant non-HKC compliant yards, smaller private vessel owners typically take the lowest cost option available to them, while larger companies with greater visibility and often shareholder input demand their vessels be sold for demolition at compliant yards with green recycling practices, he says.
Large vessel owners such as BW Offshore, Shelf Drilling, MSC, Maersk and Stolt Tankers have their own framework for ship recycling – as do many other shipowners – and set out clauses requiring the vessels it owns and charters to be recycled in a green and sustainable manner. These clauses are legally binding even when vessels are sold on to a third party such as a cash buyer.
Lenders and regulators
Mr Kourkoulis says reputation and finance are intertwined for large players but for smaller players, lenders and regulators ultimately hold the most sway in improving practices.
“For smaller owners, they will be convinced to use green practices because of their financiers. For bigger companies, it’s because of their public profiles – but this also takes into account the financial aspect – because they have shareholders who weigh in on practices. The two areas are not independent, they are connected,” he says.
So, what is the role of the cash buyer in navigating these different, and “often confusion-causing” sets of company, regional and not-yet-implemented global regulations?
“It’s education,” says Mr Kourkoulis. “We are the only people who have involvement in every part of the process.”
“From the sale of the vessel to the last bit of the vessel being recycled, we have been involved with everything. And even after the recycling is complete, with some companies and some yards, we give feedback to both parties about how the process went and what can be improved.”
Mr Kourkoulis says, “Education might be too tough a word for some people,” but he and his company believe the process of educating and expanding awareness of green and sustainable recycling options and practices is “mandatory if you want to see fruitful results”.
It’s a dynamic for the cash buyer of pushing for better understanding on both sides.
“Many shipowners recycle maybe one ship every three years, so they may not have much awareness of the industry,” he says, “and for yards, we explain to them exactly what they need to do to meet owner demands.”
Ultimately, Mr Kourkoulis says cash buyers are “blessed to have, if not the most important, then one of the most important roles” in the process of moving the ship recycling and shipping industries forward toward improved practices for human safety and environmental protection in the very dangerous business of taking vessels apart.
“We stand everywhere in this process,” he says.
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Source: Riviera
