2017: A Critical Year for Ship Recycling

Dr. Nikos Mikelis is the non-executive director of GMS, a cash buyer of ships for recycling.

2017 is set to be a year of significant decisions that could shape the future of the global ship recycling industry. Both India and Demark have announced their intention to accede to the Hong Kong International Convention for the Safe and Environmentally Sound Recycling of Ships (HKC), while other countries are also working towards that target. The European Commission will announce its decision on whether it will include yards in India that have proven their compliance with the HKC on their list of approved recycling facilities for EU-flagged ships. The combination of these regulatory milestones means that 2017 will be a significant year for this vital global industry, and particularly for ship recycling in South Asia where three-quarters of all recycling is currently carried out.

The essential role that ship recycling plays in the global shipping industry has often been overlooked. But at a time where vessel overcapacity is having a damaging impact on freight rates and shipbuilding, recycling is coming into sharp focus as the essential part of a ship's lifecycle that it is. Ship recycling also allows materials from vessels, especially steel, which accounts for more than 90% of material recovered, to be given a new life and resold back into the market, providing a significant contribution to local economies. 

Currently, three-quarters of the shipping tonnage recycled annually occurs on the beaches of Bangladesh, India and Pakistan employing over 130,000 workers. It is these yards and primarily their workers who will either benefit most or lose out based on the decisions made in 2017.

The upcoming year holds the opportunity to raise standards, improve the health, safety and welfare of workers, reduce the environmental impact and drive widespread sustainability in recycling practices across the world. However, this must be done on a global basis, and not be limited to certain regions, which is what the European Commission threaten to do through the EU Ship Recycling Regulation if they do not include HKC compliant yards in South Asia that have met the application criteria.

It is not the location of the recycling process that determines its safety or sustainability, but how the process is managed and the oversight that is in place. Clean and safe recycling is just as possible on a beach as it is to conduct dangerous and polluting practices alongside a pier.

With three-quarters of the world's recycling capacity located in the three South Asian countries, the idea that Europe should ban its ships from being recycled there in order to protect workers' health and safety and the environment is not only irresponsible but it is also naïve.

A misjudged European decision could also damage the prospects of HKC. The global pressure for the HKC to enter into force is largely driven by western economies and Japan, with European nations playing a huge part. With a list of "approved" yards that snubs the best yards in South Asia, EU Governments could consider their work on ship recycling as "job done", removing that international pressure in support of HKC. If they were to be excluded from EU "approved" lists and with momentum lost on the HKC, investments in South Asian yards would be abandoned with no financial or regulatory incentive to improve recycling conditions. It is a bleak prospect.

Conversely, it will be of huge benefit to the region if the EU decides to include on its approved list the holding yards in India that have applied for and met the HKC Statement of Compliance (SOC) standards. Currently, of the 132 registered recycling yards in Alang, 17 have been awarded SOC with the HKC, and a further 26 are expected to receive it shortly, and another 20 yards are expected to apply for a SOC. This demonstrates positive and progressive change, and inclusion on the EU list will drive further upturn in momentum towards increased standards, as competition for EU-flagged ships drives more yards to invest in achieving the SOC standards and EU approval.

It will also demonstrate that the HKC and the EU Ship Recycling Regulation must be complementary rather than exclusive, with EU SRR helping to sustain the momentum towards HKC's entry into force. Additionally, it would also provide a greater stimulus to secure funding for hazardous waste handling facilities in Pakistan and Bangladesh to enable them to meet the standards of the HKC within ship recycling and the requirements of the Basel Convention across all industries in the region. This would benefit all industrial workers in these countries.

One way or another 2017 is a pivotal year for the ship recycling industry. Organisations and leaders in the industry must decide which course of action to back. At GMS we believe that sustainable ship recycling should become the norm rather than the exception. However, to do this it must be done on a global basis, bringing all ship recycling countries and regions to the same minimum standard. We hope the rest of the industry will join us in our view that if the EU's list excludes recycling yards based on their use of the beaching method, then this cannot be achieved. Indeed this will destroy the opportunity of improving safety and welfare standards at some of the world's unsustainable yards.

2017 is the year that EU will make a decision that either supports improvement for or abandons South Asia's 130,000 recycling workers. GMS stands alongside the IndustriALL Union in calling on the EU to choose to support global improvement. We hope that you will do the same.