The ship recycling market is a certain growth market. At the end of the decade (2010) some 4.000 ships with an aggregate gross tonnage of 24 million should be recycled every year. These figures warrant a structural approach to the ship recycling issue by the maritime industry as a whole and the International Maritime Organisation in particular.
Background: the future ship recycling market
The world fleet plays a crucial role in the world economy. World trade growth has fuelled this growth and at the same time shipping has facilitated it. The impressive increase of the world fleet during the second half of the last century is shown in Figure 1 in number of ships and gross tonnage over the period 1948 – 2000 [source: ISL, Shipping Statistics Yearbook 2000].
The world fleet consisted in 2000 of almost 89.000 vessels over 100 gt with an aggregate gross tonnage of 554 million.
The useful trading life of a ship is limited to 25-30 years, which means that every year a 3.5 to 4 per cent share of the world fleet has to be scrapped or better, recycled. The average scrapping age of 26.5 years in 1998 is in line with this technical replacement ratio.
Based on the assumption that every year 4 per cent of the ships has to be scrapped, the annual number of ships should be around 3,000. The fact that in the industry statistics show much lower numbers is caused by the fact that demolition of many small ships (>100gt) is not reported.
The growth of the world fleet corresponds with the growth of seaborne trade and the world economy. The past half century has demonstrated – with the exception of oil tanker shipping – that the shipping sector is likely to continue to grow also in the new millennium. Therefore the number of ships and the tonnage which will have to be scrapped, will increase gradually as well to 4000 per annum by the year 2010 with an aggregate gross tonnage of 24 million.
There is a need for an international Ship Recycling Industry Charter in which guidelines for ship recycling yards are formulated as well as guidelines for shipowners in order to make the ship recycling industry an environmental friendly process and a healthy and safe working environment.
Background: the ship recycling industry
The ship recycling industry has been – historically speaking – a footlose industry. It has in the past moved from Europe to the Far East, in particular to Taiwan, from where it moved on to the current four foremost shipbreaking nations: India, Bangladesh, Pakistan and China. These four countries handle an estimated 85 per cent of the world scrap tonnage in terms of light ship weight.
The rationale for the these countries to be involved in ship recycling is more or less identical. They all have the need for employment for the masses and they cannot afford major investments; they all can recycle (re-roll) most of the steel of the ships and use it in the construction industry; they all have a very well developed market for all the machinery and equipment on board ships.
The situation in China is a bit different since the methods used in shipbreaking are much more capital intensive while China attempts to introduce a higher technological level of ship demolition.
The problems arising within the major ship recycling nations are concentrated around three themes: environment, occupational health, and safety at the workplace. These issues are important but in principle relatively easy to solve, although at a cost. The competitive nature of the industry does not result in gross margins for the shipbreakers that facilitate the investment in the necessary systems, training, and equipment. However, relatively minor investments are required to help solve the major bottlenecks in these countries.
The ship recycling industry is concentrated in a very limited number of countries and their level and state of economic development makes it an activity that suits their needs perfectly. The problems that the industry faces can be solved with some organisation and money.
There is a need for international guidelines to define criteria for the recycling of ships in a responsible way by the ship recycling yards around the world in order to create a level playing field. At the same time shipowners should be required to prepare their ships for recycling once they are sold for demolition.
Since all international maritime rules and regulations in the world have been issued by the IMO, it is logical to have new rules and regulations for the ship recycling industry also developed by this organisation. It remains to be seen whether this should take the form of a new Ship Recycling Convention, or a less formal Ship Recycling Industry Charter.
Background: Stakeholders and regulatory framework
There exist no international rules and regulations for the ship recycling industry. Ship recycling is currently the domain of the national regulatory bodies in each country. This is rather odd since the rest of the life cycle of ships – design, construct and build, operation and maintenance – is very well regulated at a world level.
The question of setting up a regulatory framework raises the issues of who should be responsible for what and under which umbrella should everything come together?
The stakeholders are shipbreakers/recyclers, shipbuilders, marine equipment suppliers, shipowners, classification societies and their trade organisations, port states, flag states, and environmental orgnisations.
The regulatory bodies involved are the IMO, ILO, UNEP, and their national equivalents, as well as a number of NGO’s.
Elements of a Ship Recycling Convention of Industry Charter should be:
4.1 All ships should be recycled at the end of their trading life and this should be done in a responsible way;
4.2 Implementation of the Convention or Industry Charter will require a tight control system;
4.3 A register of ships that are and will be recycled has to be created;
4.4 The management of the Ship Recycling Register could be delegated to flag states as well as classification societies;
4.5 Ship recycling requires a process and quality definition on which acceptable international standards for ship recycling yards and shipowners can be based;
4.6 A Ship Recycling Code should be created on which basis a certificate of approval for ship recyclers around the world can be based;
4.7 The Code should draw up standards and measures which should be executed by the shipowner before a ship arrives at the shiprecycling yard;
4.8 The Industry Working Party on Ship Recycling under the secretariat of the International Chamber of Shipping, has drawn up a draft Code of Practice on Ship Recycling, which could form the basis for such a Code;
4.9 In order to create an objective instrument which measures the extent of hazardous material on board a ship for the regulator, shipowner and ship recycler, it is necessary to establish a materials passport or better, a materials certificate for each (new) ship.
4.10 The implementation of the Ship Recycling Convention or Industry Charter will require a major one time effort and funds. The creation of a structure to raise the neceassry funds from the maritime stakeholders is required.
Background: Ship Recycling Convention or Industry Charter
Major changes in regulations of ship design and operation have in the past often been triggered by serious problems or disasters, such as the overloading of ships which lead to the Load Line Convention, the Titanic tragedy which lead a couple of years later to the SOLAS Convention or more recently the pollution of the marine environment caused by shipping which lead to the MARPOL Convention.
It is therefore logical that the last part of the life cycle of a ship – the disposal and recycling – which is currently percieved by many as a major problem, will be regulated by a new Convention or at least a tightly controlled Industry Charter. Given the diverse and sometimes complex aspects of ship recycling it is probably justified to make a new convention and not extend for example the Marpol Convention with yet another addendum.
What should be regulated in a new convention or industry charter?
Basic Principle of the Convention or Industry Charter
The replacement of 4,000 ships per annum with an aggregate gross tonnage of 24 million by the year 2010, may result in a littering of the oceans, beaches, rivers and ports if these ships are not recycled in a responsible way.
Currently the shipowner has no formal obligation to recycle his ship, let alone in a responsible way. Therefore the basic principle that should be addressed in a convention or industry charter is that all ships should be recycled at the end of their trading life and that this should be done in a responsible way.
The shipowners have an obligation when they cease operations with a ship, to have it recycled. The ship can not remain idle in a fjord, port, river or beach and gradually waste away and pollute the environment. The Convention or Industry Charter takes away the freedom of owners to do as they please with a ship at the end of the life cycle.
Implementation of the Convention or Industry Charter will require a tight control system, for which an extension of the IMO’s current ship registration system could be used.
Ship Recycling Register
The Ship Recycling Convention or Industry Charter will require a good reporting system from flag states as well as classification societies regarding ships that cease their operations and should be recycled. The flag state should notify the owner of his obligation to recycle his ship within a certain period and the flag state should also look after the actual execution of the recycling obligation by the owner. The flag state should inform the IMO of the obligation to recycle the ship within a certain time frame. This means that IMO should set up a register of ships that are and will be recycled. This Ship Recycling Register could take the form of a publicly accessible database. The public nature of the Register makes it possible for all stakeholders to obtain information and this may create a powerful feedback loop in the maritime world and the recycling industry.
In fact, the Register will form an essential part of a worldwide bookkeeping system. This is necessary since today their exists a huge discrepancy between the reported number of ships that are recycled and the actual number of ships that cease operations and may have been scrapped unnoticed or that are dumped somewhere by the owner. The latter is particularly the case with smaller ships.
The management of the Ship Recycling Register can be delegated to flag states as well as classification societies.
A clear definition should be adopted of “cease operations”, as shipping has known prolonged periods of lay ups of ships, which of course do not fall within this criterion. It could for example be phrased that a ship of over 25 years, that has not operated for more than a year and has lost the certificates, is considered to be ready for recycling.
Ship Recycling Code
Ship recycling requires a process and quality definition on which acceptable international standards for ship recycling yards and shipowners can be based. Minimum standards should be defined for the yards and the shipowners with respect to environmental treatment of hazardous materials, the health and welfare of the workers and their safety.
It would be advisable to create an Ship Recycling Code on which basis a certificate of approval for ship recyclers around the world can be based. Ship recycling yards with such a certificate are allowed to recycle ships. This certificate could be drawn up with the help of organisations such as ILO and UNEP and various NGO’s.
Another aspect that should become part of a Ship Recycling Code concerns the preparation of a ship for recycling by the shipowner. Hazardous materials that are not part of the ship should be removed. This could be cargo residues but also for example gasfreeing of tankers for hot work. The Code should draw up standards and measures which should be executed before a ship arrives at the yard of the ship recycler.
At the same time, there are materials on board the ship which are difficult to handle and treat in the ship recycling countries, for example pcb’s. The Code could stipulate that these materials should be re-exported to a country where the infrastructure exists to deal with this hazardous material.
The Industry Working Party on Ship Recycling under the secretariat of the International Chamber of Shipping, has drawn up a draft Code of Practice on Ship Recycling, which could form the basis for such a Code.
The Ship Recycling Code, which will form an integral part of the Ship Recycling Convention or Industry Charter can be managed just as the ISM-Code in close cooperation with the flag states and classification societies.
It should be noted that some of the environmental, health and safety issues at ship recycling yards are identical to those at regular ship repair yards around the world. The risk is that when ship recycling yards will fall under a strict ship recycling regime, ship repair yards will have to follow.
Ship Materials Certificate
A ship is a complex system with a lot of machinery and equipment. More than 99 per cent of the light ship weight can be recycled without a problem. Only a minor fraction of the ship’s weight can be termed as hazardous material. This is particularly true for older ships, built before 1980, when for example asbestos was still applied.
In order to create an objective instrument which measures the extent of the hazardous material on board a ship for the regulator, shipowner and ship recycler, it is necessary to establish a materials passport or better, a materials certificate for each (new) ship. The Ship Materials Certificate is an integral part of the Ship Recycling Covention and forms the cornerstone of the Ship Recycling Code.
The objective of the materials certificate is twofold:
- Identify in a manual and on drawings the exact place and quantity of each material, in particular hazardous materials; each change due to maintenance, repair and modifications, should be added to the certificate;
- The materials certificate will become a standard certificate of the ship’s papers and will be registered with the flag state. When a ship ceases operations, and will be recycled, the flag state where the ship is registered will send the certificate to the maritime administration of the country in which the ship will be recycled. The local government thus has an independent source of information which it can use to check the data from the ship recycling yard.
It is relatively easy to make a materials certificate for a newbuilding, as the shipyards have all the specifications in their databases. For existing ships it is more costly, since a surveyor has to inspect a ship in great detail.
It is therefore recommended to stipulate in the Ship Recycling Convention or Industry Charter that all old ships which will be recycled should have a materials certificate made and registered with their flagstate.
Funding the Ship Recycling Covention
The implementation of the Ship Recycling Convention or Industry Charter will require a major one time effort and funds of the IMO and other institutions, as well as a more modest ongoing effort. This is not budgetted for by these organisations and therefore it is proposed to create a structure to raise the neceassry funds from the maritime stakeholders. Therefore a last - financial - paragraph will conclude the Ship Recycling Convention or Industry Charter.
Additional funding is necessary to:
- to set up and maintain the Ship Recycling Register;
- to monitor the process of ship materials certificates for old and new ships;
- to monitor the preparation of ships for recycling by the shipowners;
- to inspect and certify ship recycling yards which are allowed to handle ships that have to be recycled in a responsible way;
- to supervise the logistics and re-export of hazardous materials that can not be dealt with locally;
- to help ship recycling yards improve the quality of their operations in various ways.
In order to fund these activities, additional resources should be obtained which have to be generated by the maritime industry as a whole.
The first task at hand will be to calculate the financial needs for these tasks.
The second task is to devise a levy system which does justice to the responsibilities of the shipowners, shipbuilders and marine equipment suppliers of the existing world fleet and new buildings.
It is advised to create a working group which proposes a number of systems. The analogies from other industries, like cars, indicate that (cost) effective solutions are not difficult to find.
Ship Recycling Convention or Industry Charter structure
The structure of the Convention or Industry Charter is schematically represented below.
Ships have to be recycled by the shipowner
in a responsible way at the end of their trading life
Four Building Blocks
1. Ship Recycling Register
2. Ship Recycling Code
3. Ship Materials Certificate
4. Funding system