The focus of attention has now shifted to the USA now that both requirements for the international ballast water convention to come into force have been met, and for good reason.
The race has been set up among the ballast water management equipment makers to be the first to secure type approval from the US Coast Guard as they are fully aware that to have that certificate for a particular treatment model will be rewarded by owners preferring it over competitors when they are forced to install systems.
Slow progress in approval of the convention
The ballast water convention has been a regulatory beast of its own making. Long Winded diplomatic debates meant it took over 10 years for the convention text to be agreed, and then another 12 for it to have enough flag state ratifications to bring it into force. And now the industry is at a point where the way the equipment is being type-approved under the IMO system remains suspect.
The US method of equipment type approval is accepted as being more robust, but there are no systems type-approved.
Some interesting statistics
- Fifty-eight alternate management systems (AMS) certificates, allowing systems to be used for a temporary five-year period in US waters;
- Five independent laboratories approved for Coast Guard type approval testing (all equipment makers need to have their kit independently assessed);
- Seventeen systems being tested in independent laboratories;
- Four systems completed testing at CG independent labs, applications pending;
- No complete type approval applications received to date;
- Over 10,000 extension letters issued for vessels with 2014-2018 original US compliance dates;
- Over 1,000 extension requests received for vessels with original compliance dates in 2019 and beyond (this is a permit to not have a system installed for a specific period);
- Up to 200 extension applications each week (down from 300 a week).
- Will the cost of compliance will force owners to scrap vessels rather than invest heavily in compliance?
As ship’s compliance dates are due owners have to plan and have installed treatment systems. These may be quite expensive, $15m perhaps for larger systems on large bulk carriers and tankers.
For some, compliance may well be due in 2020 or thereabouts, when a global sulphur cap will have an impact on operating costs, and the industry will have more clarity on CO2 rules that could have an impact on asset operations.
The result clearly is that a 15-year-old vessel coming up for a third annual survey, which itself is no cheap event, may be more eligible for scrapping than putting in the investment and returning to service. With the current poor markets there are already reports that some vessels of that age and younger are being scrapped now.
There have been reports that some owners have brought forward surveys to ensure they lengthen the time before vessels need to be ballast water rule compliant.
Also, there is the link between ballast water compliance and Basel IV.
Banks are currently averse to risk, yet how will they react when cash-strapped owner-customers seek loan restructuring to meet these added asset investment requirements?
Will they be able to do this across the board, or will the risk of increased capital adequacy requirements undermine the already weak appetite for shipping debt and give owners no source of capital to make vessels compliant?
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Source: Lloyd’s List