The bulk carrier industry has been seriously affected by the current recession in the world economy, and most operators are now facing a market where the capacity outweighs the demand.
The effects of this can be seen not only by falling freight rates but also by the number of vessels
sent for scrapping. This constitutes considerable resources in terms of scrap steel supply to the
steel industry, but also represents an environmental challenge unless the scrapping -
or rather the recycling - is done in an environmentally sound manner.
The challenge
The volume of tonnage sent for recycling in the first month of 2009 alone was more than 40% of the total recycled in the whole of 2006. The demolition activity in 2008 reached 12.5m dwt, which is nearly double the 2006 level of 6.4m dwt. In January this year, buyer activity had already reached 20% of 2008’s total scrapping volume, with 2.7m dwt purchased for demolition. It is also worth noting that whereas the average age of vessels sent for recycling in the 1990s was 26-27 years, this had risen to around 33 in 2007. All of this indicates that we can expect an even greater focus on demolition in the years to come.
A vessel’s technical standard will inevitably deteriorate over time and the cost involved in maintaining the required standards will increase correspondingly until it is no longer economically viable to continue trading.
Obsolete vessels represent considerable resources in terms of scrap steel supply to the steel industry. Hence, the scrap value is closely related to the steel weight. Sadly - an obsolete vessel also represents an environmental challenge which calls for serious handling of the issues involved.
DNV’s response to the challenge
DNV has for nearly two decades been actively involved in the problems related to harmful substances on board vessels due for recycling. This is typically exemplified by our involvement with the Brent Spar platform in 1994 following the controversial decision to sink the platform in open water. Since then, DNV has completed more than 25 inventories on offshore installations.
Following its efforts in the offshore sector, DNV has strongly advocated an equivalent implementation in the maritime industry through taking an active role in the development of the IMO Guideline in 2003 and further the new “International Convention for the Safe and Environmentally Sound Recycling of Ships” (IMO Convention). The IMO Convention stipulates requirements regarding the documentation of the potentially harmful substances contained in a vessel (Inventory of Hazardous Materials). This is an absolute prerequisite for the proper demolition of the vessel by the recycling yard.
To date, close to 50 vessels have been thoroughly inspected and issued with an Inventory of Hazardous Materials by DNV. In our experience, relevant documentation may be scarce and, when found, may often be misleading. For this reason, DNV stresses the importance of basing an Inventory of Hazardous Materials (Green Passport Inventory) for ships in operation on an on-board survey and not just a paper exercise. With the new IMO Convention, the rest of the industry will also have to follow this practice.
International regulations
Ship recycling is not currently regulated by any mandatory IMO convention. This will be the case only when the new IMO Convention is ratified. However, the Basel Convention generally prohibits its OECD member states from exporting harmful waste to non-OECD countries. Some administrations interpret this as also being a prohibition against selling vessels for demolition to countries without first removing the harmful substances.
The new IMO Convention “International Convention for the Safe and Environmentally Sound Recycling of Ships” provides globally applicable ship recycling regulations for international shipping and for recycling activities. The Convention is planned to be adopted in May 2009 followed by a ratification process. It will provide regulations for:
The design, construction, operation and preparation of ships so as to facilitate safe and environmentally sound recycling without compromising the safety and operational efficiency of ships
The operation of ship recycling facilities in a safe and environmentally sound manner
The establishment of an appropriate enforcement mechanism for ship recycling, incorporating certification and reporting requirements
Hence, the new regulations will contain requirements applicable to ships, ship recycling facilities and administrations.
Following the ratification of the new convention, the demand for an Inventory of Hazardous Materials (IHM) is expected to grow significantly as shown in the figure below. DNV is currently qualifying personnel to provide continued support for this.
Third-party evaluation of recycling yards
Demolition is a labour-intensive activity. Most of the recycling yards are located in the Indian subcontinent or China. Bangladesh is the leading recycling state in terms of tonnage (65%), followed by India (21%) and then China, Pakistan and Turkey, which account for the remaining 10-15%.
For more than 10 years, ship breaking has been the subject of strong public debate, fuelled first by the images captured at Chittagong in Bangladesh by Brazilian photographer Sebastiao Salgado and published in 1993 in his book Workers , for which he was awarded the Pulitzer Prize in 1997. Such publicity has regularly brought end-of-life ships, ship owners, ship breaking yards and various authorities into the public spotlight and led to questions regarding the legality of the present practices.
Whereas the majority of ships are demolished when stranded on a beach, we see that, with the recent drop in the newbuilding market, newbuilding yards are showing an increased interest in adding recycling to their business. This opens up possibilities for a change in this market and it has been suggested that an internationally recognised classification, certification and audit system for recycling yards should be created. DNV is actively supporting this process and is currently participating in a project with several other involved parties to set up a regime for establishing mechanisms for third-party evaluation of recycling yards.