Looming ship recycling deadlines

The entry into force of the EU Ship Recycling regulations (EU SRR) on 31 December 2018 introduced requirements for vessel owners to prepare and carry an inventory of hazardous materials (IHM) for newbuildings of 500 gt and above, and ensure ships destined for demolition shall have a certified IHM and be sent to one of the recycling facilities in the EU List of approved ship recycling facilities.

“Port State Control authorities have already begun to enforce IHM compliance,” Townsend noted.

The reach of the EU SRR will be extended on 31 December 2020, when the requirement to carry an up-to-date IHM will be extended to both existing EU-flagged tonnage as well as non-EU flagged ships that will visit EU ports.

Some estimates have put the number of affected vessels as high as 20,000 vessels, or roughly 33% of the global fleet. The effects of the process are likely to lead to an improvement in health and safety standards in the ship recycling industry.

“There is no doubt that with the current attention on environmental standards, increasing attention will be focused on end-of-life recycling practices,” Townsend noted.

IHM

The production of the IHM involves the check and sampling of a vessel’s materials, components and machinery, including paint.

For vessels in operation, documenting the make-up of insulation materials, along with other components, can be a challenge as most onboard materials are not supported by material declarations. “It is worth seeking expert advice rather than sampling everything,” Townsend noted.

While the production of an IHM cannot be rushed, a number of online tools have been launched to simplify the process of keeping it up to date. Bureau Veritas offers an online application, Praxis, that allows crew members and shoreside staff to keep an inventory up-to-date.

Online IHM management tools offer particular advantages for ship operators and ship owners who need to manage sampling and risk management processes across a fleet of vessels.

Hong Kong Convention

Ship owners and operators who are about to embark on the process of compiling up an IHM should note that a second set of ship recycling regulations, the International Maritime Organization’s Hong Kong Convention (HKC), is currently in the process of ratification. This would extend the requirement to draw up an IHM to the entire global fleet.

Of the three criteria for ratification (15 member states, 40% of the global fleet, and 3% of combined ship recycling capacity), at least two are likely to be met by the end of 2020, Townsend noted. “We could see the Hong Kong Convention come into force as soon as the end of 2020,” he added.

While the process of producing the IHM is broadly similar for both the EU SRR and HKC, there are differences in terms of the materials covered (the EU SRR lists both PFOS and HBCDD) and control measures.

“It is not helpful for the industry to have to handle two sets of standards. Ideally, we would like to see the two different schemes consolidated,” Townsend said.

EU List of approved facilities

The EU List of approved ship recycling facilities includes 34 facilities, of which nine facilities are located outside the EU, in Norway, Turkey and the United States.

The absence of ship recycling facilities that use intertidal landing, which is used in the main recycling centres in Bangladesh and India, limits the number of recycling centres on the EU List able to handle larger vessel sizes.

Following the decision by the Chinese government to restrict imports of scrap and other secondary materials, Chinese shipyards withdrew from the EU List. Consequently, the current EU List is unlikely to have sufficient facilities to satisfy demand for larger size vessel demolitions.

“A number of Indian yards are hoping to be included on the list in the next 12 months,” Townsend noted.

The decision about whether or not to include tidal recycling facilities on the EU List is likely to have wide reaching consequences for the value of recycled vessels. Townsend noted that there is a USD300/tonne spread between prices available at EU recycling centres and in Asia, which is likely to have direct implications for the end-of-life value of EU-flagged vessels.

“There is a risk that this will create an uneven playing field for shipowners with EU flagged vessels,” Jim Heath, partner at Marprof noted.