An analysis of the creation of a global ship recycling
\nfund in the framework of the Hong Kong
\nInternational Convention for the Safe and
\nEnvironmentally Sound Recycling of Ships, 2009<\/p>\n
ABSTRACT
\nTitle of Dissertation: An analysis of the creation of a global ship recycling fund in the
\nframework of the Hong Kong International Convention for the
\nSafe and Environmentally Sound Recycling of Ships, 2009.
\nDegree: MSc
\nThis dissertation undertakes an analysis of creating a global ship recycling fund to
\npromote green ship recycling targeted under the International Maritime Organisation
\n(IMO)\u201fs Hong Kong International Convention for the Safe and Environmentally Sound
\nRecycling of Ships, 2009.
\nGreen ship recycling is always expensive therefore the ship recycling yards opt for the
\nconventional methods without following safety norms and environment friendly
\npractices. On the other hand, ship owners also are not interested in monitoring of the
\nprocedure opted by the yards in recycling of their ships because they are interested in the
\nbest price from their scrap ships.
\nTo achieve the goal of green ship recycling, enforcement of the IMO\u201fs Convention by the
\nall the stakeholders of Ship Recycling industry in an effective manner is needed.
\nTherefore, a provision of incentive is needed to motivate the stakeholders to opt the green
\nship recycling in place of conventional methods and the additional burden arisen due to
\nthis reason, needs to be compensated from the Ship Recycling Fund proposed to be
\ncreated.
\nThis dissertation discusses about the cost-barrier in green ship recycling and proposes a
\nmechanism to be developed as a market-oriented incentive scheme suggesting
\narrangement of the Ship Recycling Fund, its monitoring and disbursement method.
\nKEY WORDS: Ship Recycling Convention, green ship recycling, safety of human and
\nthe environment, hazardous materials, toxic wastes, conventional and standard methods
\nof ship recycling, Ship Recycling Fund.
\niv
\nTABLE OF CONTENTS
\nDECLARATION………………………………………………………………………………………………………….i
\nACKNOWLEDGEMENTS …………………………………………………………………………………………….ii
\nABSTRACT……………………………………………………………………………………………………………..iii
\nLIST OF TABLES …………………………………………………………………………………………………….. vii
\nLIST OF FIGURES…………………………………………………………………………………………………… viii
\nLIST OF ABBREVIATIONS…………………………………………………………………………………………..ix
\nCHAPTER- 1 Introduction…………………………………………………………………………………………..1
\n1.1 Background ……………………………………………………………………………………………………………. 1
\n1.2 Objectives………………………………………………………………………………………………………………. 3
\n1.3 Methodology………………………………………………………………………………………………………….. 4
\n1.4 Scope and Limitation……………………………………………………………………………………………….. 5
\nCHAPTER- 2 Ship Recycling Industry…………………………………………………………………………….7
\n2.1 Ship Recycling: An Overview…………………………………………………………………………………….. 7
\n2.2 Ship recycling states and their market share………………………………………………………………. 8
\n2.3 Ship Recycling: A Process ……………………………………………………………………………………… 11
\n2.4 Market developments and ship recycling ……………………………………………………………….. 15
\n2.5 Procedures and practices for ship recycling…………………………………………………………….. 19
\n2.6 Stakeholders in ship recycling ……………………………………………………………………………….. 21
\n2.6.1 Ship owner……………………………………………………………………………………………………….. 21
\n2.6.2 Ship broker………………………………………………………………………………………………………. 22
\nv
\n2.6.3 Ship recycling yard ……………………………………………………………………………………………… 22
\nCHAPTER- 3 Ship Recycling: Existing and Standard Procedures ……………………………………….23
\n3.1 Ship recycling destinations……………………………………………………………………………………… 23
\n3.2 Econometric analysis of the ship recycling market…………………………………………………….. 25
\n3.3 Existing procedures for ship recycling…………………………………………………………………….. 27
\n3.4 Occupational hazards and standard procedures for ship recycling………………………………. 29
\n3.5 Gap between existing and standard practices of ship recycling…………………………………… 35
\nCHAPTER- 4 Regulations\/Guidelines on ship recycling …………………………………………………..38
\n4.1 The environmental issue: Ship recycling…………………………………………………………………… 38
\n4.2 Adoption of the Hong Kong Convention, 2009………………………………………………………….. 39
\n4.3 Hong Kong Convention and its enforcement…………………………………………………………….. 40
\n4.4 Structure of the Convention …………………………………………………………………………………… 42
\n4.5 Analysis of the Convention …………………………………………………………………………………….. 44
\nCHAPTER- 5 Ship Recycling Fund: An Incentive Scheme …………………………………………………51
\n5.1 Background ………………………………………………………………………………………………………….. 51
\n5.2 Cost a barrier in green ship recycling……………………………………………………………………….. 52
\n5.3 Estimation of Ship Recycling Fund …………………………………………………………………………… 57
\n5.4 Financial structure of the Fund ……………………………………………………………………………….. 59
\n5.5 Financial mechanism of the Fund ……………………………………………………………………………. 60
\n5.6 Disbursement mechanism of Ship Recycling Fund …………………………………………………….. 63
\n5.7 Similar system existing for waste management ………………………………………………………… 65
\nvi
\n5.8 Summary ……………………………………………………………………………………………………………… 67
\nCHAPTER- 6 Discussion and Conclusions …………………………………………………………………….68
\n6.1 Maritime industry and ship recycling……………………………………………………………………….. 68
\n6.2 Ship recycling: a commercial activity ……………………………………………………………………….. 69
\n6.3 Conclusions ………………………………………………………………………………………………………….. 71
\nREFERENCES …………………………………………………………………………………………………………73
\nAPPENDICES …………………………………………………………………………………………………………78
\nAppendix A…………………………………………………………………………………………………………..78
\nAppendix B…………………………………………………………………………………………………………..79
\nAppendix C …………………………………………………………………………………………………………..80
\nAppendix D…………………………………………………………………………………………………………..81
\nAppendix E …………………………………………………………………………………………………………..82
\nAppendix F …………………………………………………………………………………………………………..83
\nAppendix G…………………………………………………………………………………………………………..84
\nvii
\nLIST OF TABLES
\nTable 1- Ship Recycling Industry contributions in Bangladesh, India and Pakistan…………………12
\nTable 2- Main cost and profit margins of ship breaking and recycling, mid-2009 …………………..15
\nTable 3- Average age (in years) of broken-up ships by type 1999-2009 ………………………………..17
\nTable 4- Mean age, tonnage and scrap price per scrapping location (1978-2007)……………………26
\nTable 5- Average waste materials left on board vessels to be recycled ………………………………….28
\nTable 6- Maximum exposure limits for contaminants………………………………………………………….34
\nTable 7- Tonnage scrapped globally and in Bangladesh, India and Pakistan, 2010-2030 …………57
\nTable 8- Conversion factors…………………………………………………………………………………………….57
\nTable 9- Requirement of additional fund for green ship recycling ………………………………………..58
\nTable 10- World merchant fleet by country of domicile as of January 1st, 2006-2010 …………….61
\nTable 11- Addition to the world merchant fleet by nation and foreign flag distribution …………..61
\nviii
\nLIST OF FIGURES
\nFigure 1- Leading recycling states in terms of ship numbers………………………………………………..10
\nFigure 2- Leading recycling States in terms of tonnage……………………………………………………….10
\nFigure 3- Market share of leading recycling States in terms of tonnage…………………………………11
\nFigure 4- Factors responsible for ship recycling decisions…………………………………………………..19
\nFigure 5- Participants in the ship recycling process…………………………………………………………….21
\nFigure 6- Global recycling volumes 2000-2009 and project ( help with nursing paper writing from experts with MSN & DNP degrees)ed recycling 2010-2030……………….56
\nix
\nLIST OF ABBREVIATIONS
\nARF Advance Recycling Fee
\nARN Auto Recycling Netherlands
\nBIMCO Baltic and International Maritime Council
\nDNA Deoxyribo Nucleic Acid
\nDWT Dead Weight Ton \/ Tonnage
\nELV End-of-life Vehicle
\nESM Environmentally Sound Management
\nGT Gross Ton \/ Tonnage
\nICS International Chamber of Shipping
\nIGO Inter-governmental organization
\nIHM Inventory of Hazardous Materials
\nILO International Labour Organization
\nIMO International Maritime Organization
\nISRT International Ship Recycling Trust
\nJARC Japan Automobile Recycling Promotion Centre
\nLDT Light Displacement Ton \/ Tonnage
\nMARPOL Marine Pollution
\nMEPC Marine Environment Protection Committee
\nNGO Non-governmental organization
\nNOx Nitrogen oxide
\nNVMSRP National Vehicle Mercury Switch Recovery Programme
\nOECD Organization for Economic Co-operation and Development
\nP & I Club Protection and Indemnity Club
\nx
\nPCB Polychlorinated Biphenyl
\nR & D Research and Development
\nRO-RO Roll on- Roll off
\nSENS Shiftung Entsorgung Schweiz (an organisation in Switzerland)
\nSOx Sulphur oxide
\nSWICO Swiss Association for Information, Communication and Organisational
\nTechnology (an organisation in Switzerland)
\nTBT Tributyltin
\nU. K. United Kingdom
\nU.S. \/ U.S.A. United States \/ United States of America
\nUNCLOS United Nations Convention on the Law of the Sea
\nUNCTAD United Nations Conference on Trade and Development
\nVLCC Very Large Crude Carrier
\n1
\nCHAPTER- 1
\nIntroduction
\n1.1 Background
\nShipping is the most environment friendly and cheapest mode of transportation
\nwhich is responsible for carriage of goods of more than 90 % of the world tonnage. Ships,
\nthe focal point in the shipping industry, have a life span of 20-25 years for commercial
\nuse and after that period they are replaced by new ones with the latest technology and
\nmore environmentally friendly design. Accordingly, old ships are taken out of operation
\nand sent for recycling as there is little scope to convert them for other uses. Ship
\nrecycling offers the most environmentally sustainable way of disposing of ships, with
\nvirtually every part of hull, machinery, equipment and fittings being reused or recycled as
\nscrap metal. It can, therefore, be said that decommissioning of ships is a commercial
\nprocess to convert end-of-life ships into steel and other recyclable items which gives an
\nopportunity to the industry to take the incentive of economic benefits and employment
\nopportunities.
\nUp to the first half of the twentieth century, ship recycling was done all across the
\nworld but the market was dominated by the United States and the United Kingdom.
\nSubsequently, enforcement of regulations on safety of life and environment by the
\nwestern countries compelled the industry to shift from there due to cost-escalation. The
\nship recycling industry being labour intensive, requiring 500-1500 employees for
\ndismantling of a ship, shifted to the Mediterranean and then gradually to the regions with
\nlow labour costs. Demand for scrap metals also affected the market. Yards, after
\npurchasing the ships, separate the steel, usable machines, instrument, devices and other
\nparts from it for suitable reuse. Scraps are mostly used to produce new steel; therefore, it
\ncan be said that the steel content of the ship determines its price. Tankers and bulk
\ncarriers have higher prices than other vessels due to their steel content. In 1993, the
\ndemand for steel was very high in China and it dominated the market with a major share
\nof the world\u201fs scrapping business (Mikelis, 2007). However, it was then taken over by
\nIndia and Bangladesh.
\n2
\nIn the present era, Asian countries viz Bangladesh, India, Pakistan, Turkey and
\nChina, are leading the ship recycling industry in the world. Ship recycling activities
\nwhich are unsafe and environmentally unfriendly, are done in Bangladesh, India and
\nPakistan on a manual basis without basic facilities and proper training of the workers
\nabout handling the hazardous material (China and Turkey have already taken initiatives
\ntowards green ship recycling). Cheaper labour cost, liberal rules and regulations to
\ngovern the ship recycling activities motivate the ship owners and ship brokers to
\napproach these countries.
\nWith the intention to ensure safe and environmentally friendly recycling of ships,
\nthe International Maritime Organisation (IMO) after making groundwork on the issue
\ncame up with a new Convention on it. In the Diplomatic Conference in Hong Kong on
\n11-15 May, 2009, the International Convention for Safe and Environmentally Sound
\nRecycling of Ships, 2009 was adopted by the IMO. The Convention was open for
\nsignature by any state at the Headquarters of the Organisation from 1st September, 2009
\nto 31st August, 2010 and shall now be open for accession by any state. Till now, sixty
\nstates have signed the Convention including Turkey, one of the main ship recycling states
\n(Beck, 2010, p. 1). The Convention shall enter into force 24 months after the date on
\nwhich the conditions mentioned in the Convention (Article-17) are met. As mentioned
\nabove, out of the five main ship recycling states, Turkey has signed the Convention on
\n26th August, 2010 but the other four states may take some time to sign it (IMO press
\nrelease, 2010).
\nIMO\u201fs Ship Recycling Convention, 2009 has the intention to standardize
\nrecycling of ships all over the world. But green ship recycling requiring safe and
\nenvironmentally sound facilities, has cost higher in comparison to its conventional
\nmethod which attracts the industry to opt for the latter benefiting all its stakeholders. As
\nper the NGO, Greenpeace, to achieve the target of environmentally friendly ship
\nrecycling, it is necessary to create a fund to meet the additional financial burden due to
\nenvironmentally sound scrapping practices by the yards. IMO also in its meetings agreed
\nin principle to the need for establishing an International Ship Recycling Trust (ISRT)
\n3
\nFund for technical co-operation activities and encouraging ship recycling countries
\ntowards safe and environmentally friendly recycling of ships (Mikelis, 2006). After
\nendorsement in its ninety-fourth session (20-24 June, 2005) by IMO\u201fs Council, ISRT
\nFund was established with effect from 1st May, 2006.
\nSimilarly, the European Commission is also planning to create the Ship
\nDismantling Fund for proper recycling of the ships with a strong link
\nto the European Union. Here a strong link relates to the flag or ownership of a ship. As
\nper the Commission, IMO\u201fs Convention on the subject will take time to come into force,
\nmay be up to 2015 and fully effective by 2020. To control environmental pollution and
\nensure human safety, they are planning to recycle their ships at their recycling yards with
\nthe financial support through their Ship Dismantling Fund proposed to be created.
\nIntroduction of the Hong Kong Convention, 2009 without creation of a parallel financial
\nmechanism may lead to circumvention of the rules and increased use of substandard
\nscrapping yards by ship owners to avoid extra costs (\u201cThe Ship Recycling\u201d, 2005).
\nAs ship recycling is a service to the shipping community instead of a dumping
\nindustry, the shipping industry should pay for it instead of being paid for. The financial
\ngap between the conventional and green dismantling methods need to be analysed and for
\nviability of green ship recycling, there appears a need to create a global \u201eShip Recycling
\nFund\u201f to meet the additional financial burden on ship recycling yards opting for green
\nrecycling. This dissertation will undertake an analysis of creating a global ship recycling
\nfund in the framework of the Hong Kong International Convention for the Safe and
\nEnvironmentally Sound Recycling of Ships, 2009.
\n1.2 Objectives
\nTo achieve the goal of green ship recycling, enforcement of the IMO\u201fs
\nConvention by the Ship Recycling States in an effective manner is needed. To have better
\nunderstanding about the problems faced by these states in enforcement of the Convention,
\nthis research intends to first discuss about the reasons for shifting the ship recycling
\nmarket from one corner of the world to another. The trend of the market will indicate the
\nfactors responsible for selection of a site suitable for the industry. To achieve the target of
\n4
\ngreen ship recycling, it is necessary to tackle the key factors properly so that the risk of a
\nparallel market developing in any corner of the world can be avoided. Secondly, the
\nresearch analyses the procedure existing in the ship recycling states compared with the
\nstandard practice. The role played by the stakeholders of the industry needs to be
\nunderstood properly to have a good understanding of the problem faced in achieving the
\ntarget of standard practices for green ship recycling. Then the research elaborates the
\nguidelines issued by international organisations on ship recycling and analysis of the
\nresponsibility assigned to the stakeholders under the IMO\u201fs Convention on the subject.
\nLastly, it intends to analyse the practical problems of the stakeholders in compliance with
\nthe guidelines under the Convention (i.e. the cost-escalation) and explore a viable
\nsolution to the problem in green ship recycling suggesting for a provision of incentives to
\nmotivate the ship recycling yards to opt for the green ship recycling in place of
\nconventional methods and the additional burden arisen to be compensated from the Ship
\nRecycling Fund proposed to be created.
\n1.3 Methodology
\nThere are some questions which need to be replied before drawing conclusions on
\nthe research topic (sample nursing essay examples by the best nursing assignment writing service). They are as follows:
\n\uf0b7 What is the reason for shifting the ship recycling market from one place to
\nanother?
\n\uf0b7 The standard procedure for ship recycling and the procedure existing in the yards.
\n\uf0b7 What are the provisions made in the Ship Recycling Convention, 2009 and other
\nregulations \/ guidelines issued by international organisations for green ship
\nrecycling?
\n\uf0b7 What are the responsibilities bestowed upon the stakeholders of the ship recycling
\nindustry in the Ship Recycling Convention, 2009?
\n\uf0b7 What are the problems faced by the stakeholders in accepting those
\nresponsibilities and viable solution to those problems?
\n5
\n\uf0b7 Sources and disbursement mechanism of global \u201eShip Recycling Fund\u201f proposed
\nto be created to compensate the additional financial burden arisen due to green
\nship recycling.
\nFor the above said analysis, information from periodicals, conference proceedings
\nand the reports of the NGO, \u201eGreenpeace\u201f, the international consulting firm, \u201eCOWI\u201f and
\nmany other reputed organisations, have been collected. Analysis of the cost for green ship
\nrecycling method alongwith the conventional method, has been done on the basis of the
\ncalculation made in the report submitted by \u201eECORYS\u201f, a research and consultation
\ncompany, to \u201eGreenpeace\u201f, a NGO. The Ship Recycling Convention being a recent
\ndevelopment, no books published on green ship recycling as per the Convention could be
\nfound; therefore, deliberations of the conferences and reports available on ship recycling
\nhave been used for the research.
\n1.4 Scope and Limitation
\nSince ship recycling is a very broad topic (sample nursing essay examples by the best nursing assignment writing service), some areas like survey and
\ncertification of ships to be recycled, legal regime of the Conventions adopted by IMO,
\nILO and other international organisations on ship recycling have not been covered under
\nthis dissertation. As mentioned above, ship recycling is a service to the shipping
\ncommunity and therefore, they should come forward to take the responsibility of green
\nship recycling and if necessary, additional financial implication in achieving the target
\nshould also be borne by the stakeholders as a cost of waste management. This dissertation
\nfocuses on analysis of the problems faced in green ship recycling alongwith an analysis
\nof the creation of a global \u201eShip Recycling Fund\u201f proposed to be created to meet the
\nadditional cost for adopting environmentally sound ship recycling facilities as a viable
\nsolution. To achieve the goal of green ship recycling, the yards will require appropriate
\ninfrastructural facilities for environmentally sound waste disposal, training of staff, their
\nprotective clothing and appropriate tools. Providing incentives for green ship recycling
\nby the creation of a global ship recycling fund, formulating its sources and disbursement
\nmechanism intended to be covered under this research to meet the additional financial
\n6
\nburden of green ship recycling, may be helpful in achieving the goal of IMO\u201fs Ship
\nRecycling Convention, 2009.
\n7
\nCHAPTER-2
\nShip Recycling Industry
\n2.1 Ship Recycling: An Overview
\nWaterways are the oldest mode of transportation in the world. As is known from
\nthe history, in the medieval period (9th Century-16th Century) trade flourished through sea
\nroutes only; when road and air routes were not developed, people enjoyed the goods of
\nfar away with the help of the shipping sector. Silk and spices were the most popular items
\nfor trade through the sea route from Asian countries. Even in the present era, shipping is
\nthe cheapest and most eco-friendly mode of transportation for bulk cargo. After enjoying
\na boom in passenger ferries in the 19th century, this sector has seen its recession in the
\n20th century but after globalisation of the world trade, the shipping industry again shot up
\nin the last quarter of the century after shifting of the production units to the countries
\nhaving cheaper man-power and resources (Stopford, 2009, p. 143).
\nGlobalisation of trade has given the world market a good opportunity for import
\nand export of goods. The emergence of Asian countries as key drivers of modern
\nshipping, has also helped the current shipping boom (Knapp, Kumar and Remijn, 2008,
\np.1024). Accordingly, the cargo movement through sea-route increased significantly
\nwhich resulted in a demand for a good number of ships offering ship owners a chance to
\nincrease their fleet by acquisition of new ships or replacement of their ships smaller in
\nsize by larger ones. Introduction of more efficient ships also compelled the ship owners to
\nscrap their ships, physically sound but rendering uneconomical. In the very low post1973 freight market, the medium size steam-turbine tankers unable to compete with lower
\nfuel consuming diesel tankers, were scrapped in bulk due to this reason only (Buxton,
\n1991, p. 107). From time to time changes in regulations on environmental aspects also
\ncompelled ship owners to dispose of their ships; for example, the requirement of double
\nhull tankers under the MARPOL Convention1
\n(Amendments to Regulation 13G of Annex<\/p>\n
1 The International Convention for the Prevention of Marine Pollution from Ships, 1973, as modified by the
\nProtocol of 1978 (MARPOL 73\/78) entered into force on 2 October 1983 (Annexes I and II). In 1997, a
\nProtocol was adopted to add a new Annex VI. Amendments to 13G of Annexure I MARPOL 73\/78 adopted
\nthrough Tacit procedure entered into force on 05\/04\/2005.
\n8
\nI MARPOL 73\/78). All these developments resulted in the decommissioning of a good
\nnumber of old ships and ship owners were inspired to approach the market offering the
\nbest price for recycling. Asian countries having cheaper labour costs offering a handsome
\nprice for these old ships came into the picture as the favourite destination for recycling of
\nships.
\nShip recycling in its present form is a labour intensive activity demanding low
\nskills and therefore, is expected to grow in the countries having low labour costs. In
\naddition to low labour costs, recycling takes place either in the close proximity to a large
\nscrap importing market or in a location where there is a local steel industry using a high
\nproportion of scrap. Taking these characteristics into consideration, the Indian subcontinent, particularly Bangladesh, India and Pakistan, are the most promising locations
\nfor large scale recycling of ships (Drewry, 1977, p. 41).
\n2.2 Ship recycling states and their market share
\nShip recycling prices have a good link with the demand from steelworks which do
\nnot fluctuate as much as second-hand price of ships in absolute or relative terms. The
\nsecond-hand price of ships has a strong link with the freight markets, current new
\nbuilding prices along with the type, age and condition of a particular ship. On the
\ncontrary, ship recycling prices depend on the cost-structures of a particular country opted
\nfor demolition of ships. The prime factors for the ship recycling price are the value of
\nrealized materials, cost of demolition and the cost of delivery of ship to the recycling
\nyard. The value remaining after deducting the cost of demolition and delivery cost from
\nthe value of realizable materials of a ship becomes the profit from the deal.
\nMaterial received from the ships to be recycled, can be separated into the
\nfollowing categories:
\n(i) Scrap steel for furnaces,
\n(ii) Re-rollable steel,
\n(iii) Non-ferrous metals,
\n(iv) Reusable items (machinery, wooden furniture), and
\n9
\n(v) Unusable and rubbish.
\nIn the Asian market, re-rollable steel is used particularly for reinforcing bars for
\nconcrete construction. Reusable equipment like engines, generators, boilers, electrical and
\nplumbing items, wooden planks, bars, furniture, refrigerators, air-conditions also has a
\ngood market in these countries. On the other hand, in developed countries such items are
\nvalued little more than scrap which makes the realization value of scrap materials 50%
\nhigher in the Asian market than in the European market. Resultantly, after taking into
\nconsidering all the factors including cheaper labour force the ship recycling price offered
\nby the Asian market becomes just double the price offered in Europe. Due to these
\nreasons, the share of the Asian market in ship recycling increased gradually from 40% in
\nthe 1960s, 60% in mid the 1970s reaching around 90% in the 1980s and more than 95%
\n(excluding Turkey\u201fs share) in 2000. Even in Asia, the market shifts in accordance with
\nthe wages and prosperity. Ship recycling started by Japan gradually shifted to Taiwan and
\nKorea. Taiwan dominated the market with around 50% of the share from late 1960s until
\n1988 (Buxton, 1991, pp. 111-112). In the 1990s, India and Bangladesh took over the
\nmarket (Figures 1-3).<\/p>\n
10
\nFigure 1- Leading recycling states in terms of ship numbers (ships >499 GT)<\/p>\n
Figure 2- Leading recycling States in terms of tonnage (million GT) (ships >499 GT)
\n11
\nFigure 3- Market share of leading recycling States in terms of tonnage (ships >499
\nGT)
\nSource (Fig. 1, 2 & 3): Mikelis, N. E. (2007, September). A statistical overview of ship recycling. Paper
\npresented at the International Symposium on Maritime Safety, Security & Environmental Protection,
\nAthens, Greece. https:\/\/monkessays.com\/write-my-essay\/martrans.org :8093\/symposium\/papers\/Track%20B\/B42%20mikelis.pdf
\n2.3 Ship Recycling: A Process
\nShip recycling is the processing of waste or rubbish back into raw materials to
\nproduce new items. It is beneficial to the individual, the community, the world offering
\nthe most environmentally sustainable way of disposing of old vessels, with every part of
\nthe hull and machine complex being reused or recycled. Disposal of ships after its
\neconomic life was referred earlier as \u201cship demolition\u201d or \u201cship scrapping\u201d (Sinha, 1998,
\npp. 397-403). Since most of the things obtained from the ships are either recycled or
\nreused directly, now the word \u201cship recycling\u201d is used by the shipping sector for this
\npurpose. According to Rolf Westfal-Larsen, a ship owner and former chairman of
\nInternational Chamber of Shipping (ICS), everything received from the ship has a further
\nlife and nothing goes to waste; therefore, ships are not scrapped but recycled (Varcoe,
\n12
\n1999, pp. 28-30). As stated above, most of the items removed from ships are reused;
\nsome after processing and some directly. Engines, generators, boilers, electrical and
\nplumbing items, wooden planks, bars, furniture, refrigerators, air-conditions, these are the
\nitems taken from the ships which are sold directly to the market. In Bangladesh, garment
\nmanufacturing factories use these engines and generators. Boilers are used mainly in rice
\nmills, garments washing plants, knitting plants and other industries (Parkinson, 20052
\n).
\nAs is known, scraps are mostly used to produce new steel. Therefore, tankers and
\nbulk carriers have prices higher than other vessels due to their steel content. Scraps
\nreceived from these ships are recycled to get steel to be used in the construction industry
\nresulting in saving two thirds of the energy, when compared with steel production from
\nraw materials. In the absence of any domestic source of iron ore, Bangladesh gets 50 %
\nof its steel requirements from recycled ships (see Table 1):<\/p>\n
Table 1- Ship Recycling Industry contributions in Bangladesh, India and Pakistan,
\n2008\/2009
\nBangladesh India Pakistan
\nNational steel production 2.2\u20132.5 m tons 55 m tons 3 m tons
\nScrap steel from ship
\nbreaking
\nUp to 1.5 m tons Up to 3.5 m tons Up to 0.8 m tons
\nShip breaking steel\u201fs
\ncontribution to production
\n50% 5-6% 15%
\nNo. of re-rolling mills 250 to 350 1,500 operational 330
\nScrap yards (total no.) 40 active 130 active (183) 30 active (132)
\nEstimated no. of workers
\nin yards
\n22,000 16,000 \u2013 20,000<\/p>\n
6,000\u20138,000
\nSource: World Bank Report (Unpublished) on ship breaking in South Asia, November 17, 2010. p. 2.<\/p>\n
2
\nPage number not available but placed as executive summary after the slides.
\n13
\nAs is known, tankers are used to carry oil, toxic wastes, sometimes radioactive
\nmaterials and extremely poisonous chemicals. Disposal of such wastes requires training
\nand facilities to avoid damage to human health. Not only does it directly affect the health
\nof the workers, it also has an impact on the environment. When workers strip the ships
\nmarooned on the sea-shore, there is severe contamination of the sea bed, eventually
\nseeping into the marine food chain. Due to these reasons, ship breaking is considered a
\nrough business in the world.
\nIn the second half of the twentieth century, after implementation of the safety
\nregulations by developed countries, the industry shifted to the Mediterranean and then
\ngradually to the Asian countries having cheaper labour-force and liberal safety and
\nenvironmental regulations. Shifting of the ship recycling industry from developed
\ncountries can be attributed to the following four main factors (Sinha, 1998, p. 397):
\n\u2022 The industrialised countries were no longer in need of scrap steel.
\n\u2022 In the U.S. and Europe, steel was available in abundance, which brought down the
\nprices of scrap metals. Thus, ship scrapping was no longer profitable for them. In fact,
\nmany of the European countries later became net exporters of steel.
\n\u2022 Construction regulations no longer permitted the use of re-rolled products.
\n\u2022 With development, labour costs increased; safety and environmental regulations
\nbecame strict, which made it difficult for scrap dealers to continue in the business.
\nThis industry shifting from the Mediterranean reached Taiwan in Asia, where
\ncheaper labour force was available. South Korea too remained in this industry for some
\ntime. In the mid 1980s, about three-fourth of the ship scrapping industry was located in
\nTaiwan, China and South Korea, Taiwan being the leader. Thereafter, Taiwan developed
\neconomically and for the same reasons as given above, it closed the demolition yards in
\nthe early 1990s. By then, the scrapping industry had moved to India, Bangladesh and
\nPakistan because of their economic necessity and lax environmental laws. The reason for
\nthese countries\u201f involvement in the highly labour intensive ship recycling, is that they are
\nover-populated and have the need for employment for the masses. Thus, using primitive
\n14
\nmethods, the ship scrapping industry provides employment opportunities to the people in
\nthese countries along with providing a market for recycled parts.
\nAs per the information available, wage rates in Cambodia and Myanmar are lower
\nthan India and Pakistan whereas Bangladesh can compete with them on wages. From
\nwage point of view, the risk of relocation in future of ship recycling industry to these
\ncountries having cheaper man-power can not be ignored. But there are many other factors
\nalso affecting the industry like domestic steel demand, market for other recyclable items,
\nnatural condition of high tide gauge and wide beaches. Keeping in view all the factors,
\nthere is low possibility for relocation of the industry from South Asia in near future
\n(World Bank Report, 2010, p. 2).
\nAs stated above, ship recycling is considered a rough business but its impact on
\nhuman health and environment can be minimised by following the standard procedure.
\nAfter following the standard procedure ship recycling becomes costlier as it involves
\nsufficient infrastructure, requisite training of workers and proper facilities for disposal of
\nhazardous waste removed from the ships. Presently ship recycling is done mainly on a
\nmanual basis with the facilities available on beaches. The margin being small in the ship
\nrecycling business and the nature of the market being volatile, ship recycling yards are
\nnot ready to invest in mechanisation which can improve their productivity (Stopford,
\n2009, p. 649). Volatility of the market and small margin (see Table 2) in the business are
\ntherefore, the hurdle for investment in the industry. In addition, sometimes changes in the
\npolicy of the states also create problems for these yards.
\n15
\nTable 2- Main cost and profit margins of ship breaking and recycling in Bangladesh,
\nIndia and Pakistan, mid-2009 (recalculated to percent for comparison)
\nCosts (in %) Bangladesh India Pakistan
\nPurchase of ship 69 73 70
\nLabour costs 2 4 4
\nConsumables 5 4 4
\nFinancial costs 3 4 5
\nTaxes, tariffs and duties 5 5 13
\nOther costs (including investment costs
\nrents, and other costs)
\n1 2 1
\nTotal costs 85 92 97
\nComparable profit 15 8 3
\nSource: World Bank Report (Unpublished) on ship breaking in South Asia, November 17, 2010. p. 4.
\n2.4 Market developments and ship recycling
\nThe decision to sell a vessel depends on a number of variables. The relation
\nbetween these variables can be shown in terms of the formula:
\nmt
\nPo \u2013 (Pt) > \u2211 (Yk \u2013 Ck)
\nK=1
\nA vessel is sold if the difference of present sale price (Po) of the vessel and the expected
\nnet present value (Pt) is greater than the summation of the net present values of the net
\nvoyage revenue i.e. income (Y) \u2013 cost (C) expected to be earned during the time (t). Here
\nthe income (Y) will be dependent upon both current and expected earnings anticipated
\nfrom the market. The anticipated change in the cost (C) over the same period is also an
\nimportant factor for the decision to sell a vessel.
\nThe decision to sell a vessel becomes a decision to recycle it if the net present
\nvalue of the discounted net earnings of the vessel plus the discounted value of its
\nanticipated residual value at the end of its operational life, is less than the amount of
\nmoney that could be realised immediately from the sale for recycling of the vessel. When
\na vessel gets older, its operating cost rises and service speed tends to fall as scheduled and
\n16
\nun-scheduled repair time becomes greater, fuel consumption rises, equipment
\ndeteriorates, repairs and maintenance costs rise. Along with the rise in operating costs,
\nthe insurance cost of the aging vessel also increases proportionally to counter the
\nincreased trading risks. The decision whether to continue trading or to sell the vessel, is
\nreviewed during its special survey becoming due at four to five years of interval. Trading
\ncosts of a vessel include two components i.e. voyage costs and operating costs. Voyage
\ncosts cover fuel cost, port expenses and canal dues whereas operation costs cover the
\nexpenses on manning, insurance, repairs\/maintenance, stores and spares, administration
\nand other sundry expenses of the ship (Drewry, 1977, pp. 26-33). Some of the life cycle
\nfactors of a ship responsible for its recycling price Assessment are as follows:
\n(i) Type of ship: This gives an indication of configurations and the sort of plate sizes to
\nbe worked. It also indicates about the global or local trading, tramp or liner
\noperation.
\n(ii) Ship age: It works as a guide to design considerations and make up of steel content.
\nAs the ship grows older, its condition deteriorates gradually and expenditure on its
\nmaintenance increases accordingly making the operating and voyage cost higher. The
\nspeed, efficiency and cargo handling capacity of old ships make them less
\ncompetitive as many reputed charters do not accept old ships for shipment of their
\ncargo. Regulations\/Guidelines on environmental aspects from time-to-time coming
\ninto force also catalyse the ship owners to dispose their old ships. But there is no
\nspecific age of a ship recommended for its scrapping. It depends on the care and
\nexpenditure made by the ship owner on its maintenance. The statistics of the last
\ndecade indicate that average life of ships is increasing. Tankers have the least life
\n(i.e. 28 years) whereas passenger ships the maximum i.e. 43 years. The average age
\nof broken-up ships by type during the period 1999-2009 is given in Table 3:
\n17
\nTable 3- Average age (in years) of broken-up ships by type 1999-2009
\nYear Tankers Bulk
\ncarriers
\nContainer
\nships
\nGeneral
\ncargo
\nships
\nRo\/Ro
\nships
\nPassenger
\nships
\nTotal
\n1999 26.2 25.0 24.8 26.7 23.8 35.1 26.1
\n2000 26.9 25.9 25.7 27.3 23.8 30.1 27.0
\n2001 28.0 26.7 26.9 27.4 23.8 35.9 27.7
\n2002 28.3 26.6 26.0 28.2 23.7 37.7 28.0
\n2003 29.3 26.5 25.5 29.3 27.3 33.6 29.1
\n2004 29.5 27.3 30.5 32.9 28.1 37.6 31.7
\n2005 31.5 28.1 30.6 31.9 30.2 36.7 31.9
\n2006 30.0 28.9 28.1 32.3 28.6 36.6 31.4
\n2007 31.4 29.1 29.6 34.9 25.2 41.0 23.5
\n2008 31.1 30.6 29.1 33.6 28.2 23.8 32.5
\n2009 28.3 30.6 27.0 31.5 28.9 43.0 30.4
\nSource: Shipping Statistics and Market Review, Volume 54 No. 1\/2, 2010, p. 35
\n(iii) Yard of build and conversion work: It is a further guide to steel and fixture\/fittings.
\n(iv) Other items: In addition to the above components, the real condition of the ship\u201fs hull
\nis a prime factor for pricing of a ship.
\n(Drewry, 1973, pp. 5-11)
\nApart from the above factors, the price paid to the vessels to be recycled rises
\nwhen the freight market is strong. Supply of ships is declined this time due to rising Net
\nPay Value of anticipated net earnings from future trading and ship recycling yards are
\nforced to increase the price of the ships to be recycled. The inflationary trend of trading
\ncosts also influences recycling trends throughout the period under review.
\nThe market cycle also plays a great role in ship scrapping decision. The market
\ncycle is a process maintaining balance between supply and demand of tonnage for ships.
\nAt the boom stage of the shipping market, the freight rate becomes high and orders for
\nship building are given by ship owners earning substantial profit from enhanced freight
\n18
\nmarket. But at the slump stage, the freight rate goes down and the market having surplus
\nfleet compels the ship owners to opt for pre-mature disposal of their ships for recycling
\ndue to heavy operational loss. Between the year 2004 and 2008, the shipping sector was
\nenjoying the boom and freight rates went high due to high demand for maritime
\ntransportation. This demand kept even older ships in operation during the period which
\nresulted in a record low number of vessels being offered for recycling. The figure came
\ndown to 300-400 ships (larger than 499 GT) during this period against the annual average
\nof 700-800. Following the recent economic recession in 2009, the demand for maritime
\ntransport declined and the number of ships recycled during the year reached 1200. It is
\nexpected that the ship recycling market will get good number of ships for at least the
\ncoming 5-10 years due to massive booking done by the ship owners during the boom
\nperiod (\u201cShip Breaking\u201d, 2010, p. 3).
\nIn this way, it can be said that ship recycling decisions depend on many factors,
\neach of them dependent on other factors. Figure 4 shows the factors responsible for the
\nrecycling decision of a ship.
\n19
\nFigure 4- Factors responsible for ship recycling decisions
\nSource: Drewry Shipping Consultants (1996). Ship Scrapping: Locations, Activity, Price Trends and
\nProblems, p. 21
\n2.5 Procedures and practices for ship recycling
\nAfter decision to end the economic life of a ship, it is removed from fleet site and
\nis towed to the ship recycling site. The process of ship breaking is completed in three
\nstages. At the first stage, the ship owner is undertaking various operations like pumping
\nout bilge water, blocking off intakes and valves, removal of all non-metal objects along
\nwith potentially dangerous gases. Then the ship is either moored or beached\/dry-docked
\n20
\nand large metal structures are removed from the ship. After removal, pumps, auxiliary
\nengines and other pieces of equipment are sold in the market. The remainder of the ship is
\nthen cut into sections before making smaller pieces as per the requirements of rerolling
\nindustries. Thus, recycling of ships occurs in a series of steps:
\n\uf0b7 Vessel survey: Diagram of all rooms, compartments, tanks and storage areas is
\nused to identify areas containing hazardous materials like asbestos, PCBs,
\nhazardous waste, fuel and oil. Preliminary sampling of materials is conducted to
\ndecide the cutting plan identifying the compartments to be cut first.
\n\uf0b7 Removal of fuel, oil and other liquids: Removal of fuel, oil, other liquids (bilge,
\nballast water) and combustible materials from the ship, is then started which is
\ncontinued throughout the recycling process. After issuance of a hot work
\ncertificate by the marine chemist, it is considered safe for hot work like the use of
\ncutting torches and saws to dismantle the ship.
\n\uf0b7 Equipment removal: Engines, generators, boilers, electrical and plumbing items,
\nrefrigerators, air-conditions are the equipment removed from the ship to be
\nrecycled and sold in the market.
\n\uf0b7 Removal of asbestos and PCBs: The engine room usually contains the most
\nasbestos which is removed from the ship. Then PCBs containing materials
\naccessible are removed.
\n\uf0b7 Preparing surfaces for cutting: Following asbestos and PCBs removal, paint is
\nremoved from the surfaces to be cut. Presence of hard-to-remove and potentially
\ntoxic materials sometimes requires specific cut-line preparation for the safety of
\nworkers.
\n\uf0b7 Metal cutting: Upper deck and superstructure are cut first, followed by the main
\ndeck and lower decks. Large parts of the ship are cut first and lifted by cranes to
\nthe ground where they are cut to specific shapes and sizes required by the
\nfoundry or smelter. Ultimately, the remaining part of the hull is pulled ashore and
\ncut.
\n21
\n\uf0b7 Recycling of materials: Scrap metals like steel, aluminium, copper and nickel
\nalloy are stored by grade and composition and then sold to re-melting firms or
\nscrap metal brokers.
\n(A guide for ship, 2000, pp. 1-1 \u2013 9-23)
\n2.6 Stakeholders in ship recycling
\nShip owners, flag states, ship recycling yards\/states and many intermediaries are
\ninvolved in the chain of the ship recycling industry. Figure 5 below outlines the
\nparticipants involved in the ship recycling process.
\nFigure 5- Participants in the ship recycling process
\nSource: Drewry Shipping Consultants (1996). Ship Scrapping: Locations, Activity, Price Trends and
\nProblems, p. 58
\n2.6.1 Ship owner
\nThe ship owner is the only authority to take decision to sell the ship to be
\nrecycled. He can make the deal directly with the ship recycling yard or take the help of
\nship brokers. As the ship sales and purchase market is worldwide, it is difficult for a ship
\nowner to devote sufficient time on it in addition to his main job of ship operations.
\nTherefore, normally all the sales and purchases of ships are done in the international
\n22
\nmarket through ship brokers. Ship owners provide the ship brokers full details of vessels
\nalongwith the terms for their sale. The deal is finalised by the ship owner with the ship
\nbroker offering the highest price. Terms like \u201cas is\u201d or \u201cas is where is\u201d are mentioned in
\nthe agreement and in the latter term, the arrangement to bring the vessel to be recycled, is
\ndone by the buyer(s).
\n2.6.2 Ship broker
\nIn the maritime market, there are ship brokers specialised in the deal for ship
\nrecycling. They have detailed knowledge about ship recycling yards existing all over the
\nworld. They provide the information to the ship owner about the demand \/ supply
\nsituation in the market and the ship recycling prices of different types of ships along with
\nthe information about the ships sold recently. Sometimes they forecast the market trend
\nalso to Help the ship owner in taking a decision. Negotiation becomes easier between the
\nship owner and ship recycling yard after taking the services of ship broker acting as an
\nintermediary passing on the information to another party. The sale may be channelled
\nthrough a specialist intermediary dealing with the cash purchase of ships for demolition
\nassuming the responsibility for arranging the sale and the ship\u201fs physical delivery. Thus,
\nthe transaction-chain between a ship owner and ship recycling yard may involve one or
\nmore middlemen operating in either\u201fs interest.
\n2.6.3 Ship recycling yard
\nShip recycling yards rely on the information provided by the ship brokers. On the
\nbasis of the specification provided by the ship owner, yards calculate the price of the ship
\nto be recycled as per the quantity of ferrous and non-ferrous items expected to be
\nreceived from it. Yards are normally allowed to inspect the ship before its purchase but in
\ncase of not being allowed, they are dependent on the calculation about ferrous and nonferrous items on the basis of the ship\u201fs age, type, flag, owner and country of built.
\nAlthough the scrap steel provides most of the value of the ship, non-ferrous items smaller
\nin quantity even make good earnings from the sale directly to the market.
\n23
\nCHAPTER- 3
\nShip Recycling: Existing and Standard Procedures
\n3.1 Ship recycling destinations
\nAfter enjoying freight escalation for 3-4 years, the shipping industry experienced
\na drastic decline in demand in the second half of the year 2008 due to world-wide
\nrecession. Decline in demand forced the industry to adjust its supply. In the shipping
\nindustry, surplus supply has five ways for adjustment with the declined demand. Firstly,
\nit will stop ordering new tonnage; secondly, it may demolish vessels; thirdly, it may
\ncancel orders at the shipyards; fourthly, vessels may slow steam to reduce the effective
\ncapacity supplied by the existing fleet; and finally, it may temporarily withdraw the
\nexisting tonnage from service. As the industry felt a drastic decline in demand in the
\nsecond half of 2008, ship owners had no way after some period but to sell their older
\nvessels even at very low price. During the last quarter of 2008, ship recycling yards in
\nIndia got 80 vessels for scrapping followed by Bangladesh getting 70 vessels, China
\ngetting 20 and Pakistan 11 vessels. The ship recycling industry experienced in 2009 its
\nlargest growth period in history. During the first four months of 2009, 339 vessels were
\nreported to be sold for recycling against 487 vessels during the whole year of 2008. Total
\nscrapping tonnage during the first four months of 2009 (i.e. 2.9 million light displacement
\ntons) was higher than the scrapping tonnage within the period of three years between
\n2005 and 2007 (UNCTAD, 2009, pp. 64-70). The ship recycling industry is expected to
\nget good tonnage up to next 5-10 years due to the deliveries of ships ordered during the
\nboom period of the shipping market and Amendments in MARPOL Convention for
\ndouble hull tankers.
\nIn India, ship breaking activities started in 1983, are carried out in Alang, a
\ncoastal town in the state of Gujarat located on the Gulf of Khambat, 50 kilometres
\nsoutheast of Bhavnagar. Ship recycling yards have the advantage of the location as it has
\nthe highest tidal level (10 meters) in the country and the best continental shelf available
\nfor ship breaking in Asia. It is the biggest ship breaking yard in the world carrying on the
\n24
\nactivity throughout the year on its 182 plots. The high tide facility available to the area
\nmakes it possible to accommodate VLCC, bigger Ro-Ro and container ships which are
\nbeached during high tide and dismantled as the tide recedes. The author visited the ship
\nrecycling site of Alang to have first hand information about the ship recycling activities
\ndone there. Information gathered there could be utilised in the present research paper. The
\nreport of the visit is placed in Appendix-G. As per the report, after the judgement of the
\nSupreme Court of India vide order 06\/09\/2007 in a hazardous waste (Blue Lady Ship
\nbreaking) case, safety and waste management is improving gradually in these ship
\nrecycling yards. World Bank in its report (unpublished) also has accepted that following a
\nstring of national Supreme Court cases in India, regulatory authorities are making efforts
\nto improve the labour and environmental conditions there (World Bank Report, 2010,
\nUnpublished, p. 2).
\nIn Bangladesh, ship breaking is done at Fauzdarhat sea shore of Sitakunda
\nUpazilla, extending over 14 kms along Fauzdarhat to Kumira coast. Tankers, cargo ships
\nand container ships are the three types of vessels preferred by Bangladesh ship recycling
\nyards for three reasons: availability of lucrative items, relatively safe and easy breaking
\noperations and secured journey of the vessels to the beaching site. As towing of a dead
\nship for scrapping is costly and time consuming, Bangladeshi ship breakers and their
\nagents generally prefer to buy ships on voyage or ships anchored in Singapore or at a port
\nnear to Chittagong, i. e. located at any port of India, Sri Lanka, Myanmar and Thailand.
\nThe total man-power of the country involved in this industry is around 100,000.
\nIn Pakistan, Gadani situated in the west of the port city of Karachi, is the hub of
\nship breaking activities. The workers facing the problem of unemployment, are ready to
\nwork for $2-$3 a day, without safety gear and health plans (Hossain and Islam, 2006, p.
\n3).
\nIn Turkey, Aliaga is the main ship breaking site on the Aegean coast, 50 km north
\nof Izmir. Ship breaking in Aliaga started in 1984 as a consequence of liberalization
\nmeasures adopted by the Turkish Government. The environmental and working
\n25
\nconditions of Aliaga are like other ship breaking countries of Asia except the ban on
\nimport of toxic ships for recycling (Vardar and Harjono, 2002).
\nIn China, ship breaking is done in the docks with the help of cranes and
\nmachinery. Ship breaking is concentrated mainly in the following four yards:
\n(i) Chang Jiang Shipbreaking Yard, operated by the China National Shipbreaking
\nCorporation in Jiang Yin, on the Yangtze river, China,
\n(ii) Zhangjiagang Yuanwang Iron & Steel Co. Ltd, Deji, on the Yangtze river, China,
\n(iii) Gujing Shipbreaking Company, Xinhui City. Guangdong Province (Joint venture
\nby Xinhui City and China State Shipbreaking Company), on the Pearl river delta, China,
\n(iv) Shuangshui Shipbreaking Company, Xinhui City. Guangdong Province, on the Pearl
\nRiver Delta, China.
\n(Hossain and Islam, 2006, p. 3)
\n3.2 Econometric analysis of the ship recycling market
\nThe econometric analysis of market dynamics and industry trends, done by
\nEconometric Institute, Erasmus University, Rotterdam, says that the average age of ships
\nscrapped in Bangladesh is the highest followed by India and Turkey. The ship recycling
\nmarket escalated with the rising freight market due to high demand of steel and
\nBangladesh came on the top, offering the highest price for scrapping. Table 4 shows the
\nfluctuation happened in scrap prices in the ship recycling market during the period of
\n1978-2007.
\n26
\nTable 4- Mean age, tonnage and scrap price per scrapping location (1978-2007)
\nScrapping Location Age (in years) GRT Scrap Price in US$ \/LTD
\nAfrica and Middle East 14.1 7312 240
\nBangladesh 26.7 31094 299
\nChina 25.0 29372 196
\nEurope 20.7 5160 223
\nIndia 25.9 16524 221
\nNorth America and Pacific 25.5 8615 214
\nRest of Asia 15.9 7927 166
\nPakistan 24.9 26501 214
\nSouth & Central America 21.9 11042 222
\nTurkey 25.9 7034 195
\nUnknown 15.3 11320 213
\nAverage 22.0 14718 218
\nSource: Knapp, Kumar and Remjin, (2007). The Ship Recycling Conundrum: An Econometric Analysis of
\nMarket Dynamics and Industry Trends, p. 8. World Wide Web: repub.eur.nl\/res\/pub\/10878\/EI%202007-
\n52.pdf
\nFurther, as per the econometric analysis, smaller ships are scrapped in Turkey.
\nBangladesh and Turkey are the preferred ship recycling destination for the ship owners
\nfrom OECD countries. The owners from developing countries prefer Pakistani ship
\nrecycling yards whereas owners from former Eastern block countries go to Turkey.
\nRegarding flags, the study claims that most of the flag states show positive or negative
\neffect towards one country. For example, Malta has positive effect to all the ship
\nrecycling states except China and likewise Romania to all except Bangladesh. The top
\nfive flags, showing positive effects to India for recycling of their ships, are Morocco,
\nQatar, Cayman Islands, Kuwait and India. For Bangladesh, these five flags are Argentina,
\nMalaysia, Indonesia, Singapore and India. For China, they are Poland, the U.K., the
\nPhilippines, Romania and Cambodia whereas for Turkey, these are Romania, Italy, Spain,
\nCanada and Malta. For Pakistan, they are Georgia, Romania, Cambodia, St. Vincent and
\n27
\nGreece. In case of main open registries, Malta and Cyprus have positive effects towards
\nall the ship recycling states whereas Panama, Bahamas and Bermuda have positive effects
\ntowards China only. Turkey is the favourite recycling location for European flags. A few
\nstates like Cyprus, St. Vincent and the Grenadines are the exception showing positive
\neffects towards all the ship recycling states (excluding Turkey) (Knapp, Kumar and
\nRemjin, 2008, pp. 1027-1035).
\n3.3 Existing procedures for ship recycling
\nEven the principle of ship recycling being a sound one, the existing method
\nadopted by the ship recycling yards provides no room for safety of human life and the
\nenvironment. As per the study reports of NGOs and maritime journals, scrapping of ships
\nis done on the coast of the sea without any infrastructural facilities polluting the area
\nthrough hazardous substances present in the ships. Some countries have not yet made
\nmandatory the certificate, \u201cgas free for hot works\u201d and the gas tanks not emptied
\nproperly, cause accidents during the work. Workers have no way to escape but to take
\nsuch risk for the sake of their livelihood (\u201cIs there a decent\u201d, 2001).
\nWorkers have no proper knowledge about handling of these hazardous substances
\nwhich pose danger to their health and the environment. They are doing their job in these
\nyards bare handed using cutters to dismantle huge parts of the ship into small pieces
\nwithout any protection from toxic wastes
\n3
\nand steel falling from the cutters. The total
\nnumber of workers in the industry is approximately 400,000 having the age-range of 15-
\n35 years (Lucero-Prisno III, 2005, p. 2). They are poor and migrated, uneducated people
\nwho are compelled to work under the scorching sun on the open beaches without safety
\nequipment.
\nIt is a fact that ships have hazardous materials4
\nand toxic wastes like asbestos,
\nheavy metals, hydrocarbons and ozone-depleting substances. The structural parts of the
\nvessel contain insulation and asbestos panelling. There may also be cargo and operational<\/p>\n
3 Toxic waste is a discarded material that is dangerous to humans, animals and plant life. Toxic waste can
\npollute the air, land and water and exposure to it can cause cancer, other illness.
\n4 A hazardous material is any item or agent (biological, chemical, physical) which has the potential to cause
\nharm to humans, animals, or the environment, either by itself or through interaction with other factors.
\n28
\nresidues or items like sludge, lubricants, paints and electrical equipment that potentially
\ncontain harmful substances (Lucero-Prisno III, 2005, pp. 3-12). The typical waste
\nmaterials left on board vessels to be scrapped, are shown in Table 5:
\nTable 5- Average waste materials left on board vessels to be recycled
\nWaste material Waste (Ton\/ship\/year) Of which: recycled
\nor re-used
\nOf which:
\ndisposed
\nAsbestos 10.0 95% 5%
\nGlass wool 7.1 8% 92%
\nRubber 0.1 3% 97%
\nThermo coal 1.9 41% 59%
\nFiberglas 0.1 0% 100%
\nRexene 0.1 0% 100%
\nPVC 0.02 0% 100%
\nPipeline 0.03 0% 100%
\nCable 0.01 0% 100%
\nOily sludge 2.9 n.a. n.a.
\nCementing
\nmaterial tiles
\n28.6 n.a. n.a.
\nIron scaling 2.6 0% 100%
\nCard board &
\npackaging
\n0.1 0% 100%
\nGlass 0.5 0% 100%
\nOther toxic
\nchemicals
\n0.01 0% 100%
\nSource: The Ship Recycling Fund: Financing environmentally sound scrapping and recycling of
\nSea-going ships. (2005, January), p. 16. https:\/\/monkessays.com\/write-my-essay\/greenpeaceweb.org\/shipbreak\/fund.pdf
\nThe hazardous materials present in the ship are not to be reused but are required to
\nbe disposed of in a proper manner. The ship recycling yards have neither sufficient
\nknowledge how to deal with these hazardous materials; simultaneously, nor do they have
\n29
\nwaste reception facilities. Yards are normally operated on beaches without infrastructural
\nfacilities; therefore, it is very difficult to control the pollution from hazardous materials.
\nBeaches where ship breaking happens, become graveyards littered with machinery parts
\ncontaminating the land and surrounding water by hazardous materials.
\n3.4 Occupational hazards and standard procedures for ship recycling
\nIt is true that ship recycling creates job opportunities for people and contributes to
\nthe economic growth of a state, but it exposes the labour force to the risk of death, serious
\ninjury and chronic health problems. Scrapped ships have 95% of steel, coated with
\nbetween 10 and 100 tons of paint containing lead, cadmium, organotins (especially TBT),
\narsenic, zinc and chromium, depending on the ship\u201fs size and function. Ships also contain
\na wide range of other hazardous wastes, various types of asbestos, PCBs and several
\nthousand litres of oil (engine oil, bilge oil, hydraulic and lubricant oils, fuel oil and
\ngrease). Hydrocarbons present in this residual oil affect the workers\u201f DNA level and
\nmarine life.
\nAsbestos used in such ships as adhesive, sealing putty or for insulation on pipes
\nand hull, sound damping or brake linings, have very bad effect on the health of workers
\ngetting exposure during scrapping of the ship. The fine fibres of asbestos inhaled by
\nworkers accumulate in their lungs and cause lung cancer or cancers of the oesophagus,
\nstomach, colon and rectum. As per the standard practice, all asbestos containing materials
\nare required to be removed from a ship being scrapped before any activity is carried out.
\nAs per U.S. Environmental Protection Agency (A Guide for Ship, 2000, pp. 2-1 – 2-25),
\nall asbestos containing materials to be removed must be:
\n\uf0b7 Adequately wet when removed and must remain wet until collected and contained
\nfor disposal.
\n\uf0b7 Carefully lowered to the ground without dropping, throwing, sliding or otherwise
\ndamaging or disturbing the material.
\n\uf0b7 Moved to the ground via leak-tight chutes or containers if removed more than 50
\nfeet above the ground.
\nAccording to the Occupational Safety and Health Administration of U.S., there
\nmust be a regulated area for asbestos removal work and only authorised workers should
\n30
\nhave access to that area. All workers entering and working in this area must wear
\napproved respirators. Workers should not be allowed to eat, smoke, drink or chew
\ntobacco or gum in the regulated area. A qualified person should be deputed to supervise
\nthe work conducted in the area. Workers should enter or exit the regulated area through a
\nthree-stage decontamination area.
\nPolychlorinated biphenyls (PCBs) are used in the ship\u201fs electrical, heat transfer
\nand hydraulic equipment due to their non-flammability, chemical stability, high boiling
\npoint and electrical insulating properties. The parts of the ship containing PCBs are:
\nhoses\/rubber and felt gaskets, plastic foam insulation, cable\/thermal insulation, silver\/oilbased paint, primarily paint on hull steel, foundation mounts and light ballasts. PCBs are
\norganic chemicals known as chlorinated hydrocarbons. They are toxic and persistent and
\nare ingested, inhaled absorbed through the skin when workers get exposure to it. PCBs
\nare stored in the fatty tissues of the body affecting the immune, reproductive and
\nendocrine systems of the workers. They cause a variety of adverse health effects, such as
\ncancer in animals, liver damage, reproductive impairment and immune system damage.
\nThe composition of a PCB mixture changes following its release into the environment.
\nThe PCBs bio-accumulating in fish and animals tend to be the most carcinogenic
\ncomponents of PCB mixture. People ingesting PCB-contaminated fish or animal products
\nor touching PCB-contaminated sediment, may be exposed to PCB mixture that is more
\ntoxic than the PCB mixture contacted by the workers and released into the environment.
\nAs per the Occupational Safety and Health Administration of U.S., workers
\nremoving or disposing of liquid or solid PCB articles from the ships to be scrapped, are
\nrequired to use appropriate personal protective clothing or equipment. That
\nequipment\/clothing must be disposed of as PCB remediation waste. If required, workers
\nmust be provided with approved respirators appropriate for the work being conducted.
\nThere should be facilities for medical surveillance for the workers performing PCB
\nremoval work for a combined total of 30 or more days in a year. There should also be a
\ntraining programme for the workers performing PCB removal work under which training
\nmust be provided prior to or at the beginning of the work and at least once a year
\n31
\nafterwards in a manner which the workers are able to understand (A Guide for Ship,
\n2000, pp. 3-1 \u2013 3-19).
\nAs stated above, a huge quantity of paint is applied in the interior and exterior
\nparts of ships for preservation of the metal from corrosion and prevention of fouling5
\n. To
\nprevent fouling, the anti-fouling paint containing TBT (Tributyltin) is used. TBT, an
\norganic compound, is a hazardous substance causing damage to the marine ecosystem
\ndue to leaching slowly into the sea-water and entering human food chain also. IMO
\nthrough the Anti-Fouling-Systems Convention, adopted in 2001, has tried to ban its use
\non ships\u201f hull but in old ships there is possibility of its use and during the paint removal
\nexercise, the workers have the risk of exposure to this dangerous compound (Gipperth,
\n2009, pp. S86-S87).
\nPaints can be flammable also (in older ships) or may contain toxic heavy metals
\nlike Lead (Pb), Mercury (Hg) and Cadmium (Cd), Chromium (Cr), Zinc (Zn), pesticides
\nand toxic compounds like PCBs. Lead components, such as Red Lead Tetra-oxide
\n(PB3O4) and Lead Chromate are used in marine paint. In addition, they are also used in
\nbatteries, generators and motor components. Workers exposed to lead exceeding its
\npermissible limit (i.e. 50 grams\/m3
\nof air averaged over an eight hours working day)
\nsuffer from health problem like abdominal pain, anaemia, renal disease, headache,
\nmemory loss, learning difficulties and mental retardation (A Guide for Ship, 2000, pp. 6-
\n1 \u2013 6-17). Mercury affecting the nervous system, causes memory loss, insomnia,
\nexcitability, delirium and skin disorders to the workers getting exposure to it. Further,
\nmercury consumed by fish contaminates the food chain. Similarly, Cadmium inhaled by
\nworkers causes abdominal pain, diarrhea, chest pain and respiratory failure (Hossain &
\nIslam, 2006, p. 12). Sometimes a paint or preservative coating is inflammable and may
\ncatch fire in the areas to be heated during cutting. Therefore, these coating are to be
\nremoved before heating the surface to prevent ignition and should be burned away under
\ncontrolled conditions.<\/p>\n
5 The marine organisms when attach to the hull of a ship during sailing, the process is called fouling. It can
\nreduce the speed of the ship and increase the fuel consumption. Fouling can also cause introduction of
\ninvasive species in the ecosystem and to prevent it, anti-fouling paint containing TBT is used on the hull of
\nthe ship.
\n32
\nSome ships sold for scrapping contain diesel fuel, fuel oil, natural and synthetic
\noils used as lubricants and hydraulic oil. There is a chance of fire due to presence of oil
\nand fuel on these ships. Besides, some crude oil and high-end products are highly toxic
\nand exposure to this toxic oil\/fuel through dermal contact or through contaminated water
\nor inhalation of fumes\/particles, can cause damage to the liver, lungs, kidney, heart or the
\nnervous system (\u201cA Guide for Ship\u201d, 2000, pp. 5-1 \u2013 5-37).
\nRemoval\/Disposal of wastewater, specially bilge water6
\nand ballast water7
\nis
\nalso an important activity to be done during ship scrapping. If not conducted properly, it
\nhas an impact on the environment and on the health of the workers exposed to it. Bilge
\nwater consists of stagnant, dirty water and other liquids allowed draining to the lowest
\ninner part of a ship\u201fs hull. It may contain pollutants, such as oil and grease, inorganic
\nsalts and metals like arsenic, copper, chromium, lead and mercury. Similarly, ballast
\nwater, specially compensated fuel ballast8
\nand dirty ballast9 may contain residual fuel,
\nfuel additives (like biocides to control bacterial growth in the fuel oil), oil and grease,
\npetroleum hydrocarbons and metals like copper, nickel, silver and zinc. Metals contained
\nin bilge and ballast water can not be removed through treatment or environmental
\ndegradation and if ingested, can cause various health problems like lead-poisoning and
\ncancer. Bilge water sometimes contains toxic organs e.g. solvents or PCBs which may
\ncause cancer or lead to other serious ailments like kidney\/liver damage, anaemia and
\nheart failure. Bilge water containing oil and fuel can interfere with plant life and the
\nanimals\u201f respiration or can poison the fish and other marine organisms as well. Besides,
\nballast water containing micro-organisms and pathogens transported and discharged into
\nport\/coastal waters sometimes causes significant changes to the ecosystem, upsets the<\/p>\n
6 Bilge water is a mixture of fresh water, sea water, oil, sludge, chemicals and various other fluids
\naccumulated in bilge wells.
\n7
\nShips use water as ballast to adjust their position in the water to improve their manoeuvrability and
\nstability.
\n8
\nSea water that is taken in by the ship as a replacement to the fuel for maintaining its stability, is called
\ncompensated fuel ballast.
\n9 When the sea water is pumped into empty fuel tanks for the purpose of increasing ship stability, it mixes
\nwith residual fuel and produces dirty ballast.
\n33
\necological balance and finally causes economic loss to the area. Before scrapping the
\nship, onboard water must be tested to determine pollutant concentration prior to transfer
\nonshore\/discharge. Prior to discharge, waste water treatment should be done to remove
\ncertain pollutants (\u201cA Guide for Ship\u201d, 2000, pp. 4-1 \u2013 4-48).
\nApart from the hazardous and toxic materials present in the ship, metal cutting
\nalso causes health problems to the workers performing it. As stated above, ships have
\n95% of steel which is removed during its scrapping by cutting it into pieces using a
\nvariety of torches and mechanical cutters. The existing process adopted by ship recycling
\nyards for metal cutting and scrap metal management poses a threat to the environment as
\nwell as workers\u201f health and safety. During the ship scrapping, upper decks and systems of
\nthe ship are cut first, followed by the main deck and lower decks. After cutting, the larger
\nparts of the ship are lifted by cranes to the ground where they are further cut into smaller
\nshapes and sizes as per the requirement of the buyers. For cutting these ferrous and nonferrous (bronze, brass and various other copper alloys) scrap, different types of torches
\nand mechanical cutters are used. Oxygen-fuel torches operating with a flame temperature
\nof 3,500 degree \u2013 4,000 degree Fahrenheit and flame velocity of 290 \u2013 425 feet \/ second,
\nare used for cutting steel. It burns a wide variety of fuel such as acetylene, propane,
\nbutane, fuel gas or natural gas and uses oxygen (liquid or compressed) or liquid air as
\noxidizer\/cutting gas that serves to burn (oxidize) iron along the cut-line. Electric arc or
\nplasma arc torches which are able to generate temperature high enough to liquefy almost
\nany metal by the discharge of electric arc, are used for the metals not suitable for cutting
\nwith oxygen-fuel torches. For making large metal parts to small dimension suitable for a
\nmelting furnace, shears are used. Saws with circular\/reciprocal blades are used for cutting
\nnonferrous metals.
\nTorch cutting generates large amounts of fumes of the materials like manganese,
\nnickel, chromium, iron, aluminium, asbestos and lead as particulates. As mentioned
\nabove, cutting torches themselves generate oxides of nitrogen (NOx) and sulphur (SOx)
\nand the process of combustion produces carbon dioxide and carbon monoxide. These
\ncontaminants inhaled by the workers from air, metal fumes, particulates and smoke, can
\ncause poisoning and long-term damage to their central nervous system. Further, there is a
\n34
\npossibility of soil\/water contamination, primarily from lead, if scrap metal or other waste
\ngenerated from metal cutting, are not properly stored or disposed. In case of exposure of
\nmetal scrap\/waste with storm water, the water contamination is possible from the metal
\nwaste and contaminants from the scrap. Therefore, yards must fix the exposure limit for
\nvarious contaminants considered toxic. The maximum exposure limits fixed by U.S.
\nEnvironmental Protection Agency for contaminants are shown in Table 6:
\nTable 6- Maximum exposure limits for contaminants
\nContaminants 8-hours time-weighted average
\nChromium metal 1 mg\/m3
\nNickel 1 mg\/m3
\nParticulates not otherwise
\nregulated
\n15 mg\/m3
\nLead 50 g\/m3
\nCadmium 5 g\/m3
\nSource: A Guide for Ship Scrappers: Tips for Regulatory Compliance, 2000, p. 7-6
\nHot work in ships also causes accidents mostly due to lack of care on the occasion
\nof scrapping. Therefore, before performing hot work in certain confined or enclosed
\nspace or any dangerous atmosphere or pipeline, it should be tested and certified by a
\nmarine chemist as \u201csafe for hot work\u201d. Hot work should not be performed in or on the
\nspaces or other dangerous atmosphere (e.g. dry cargo hold, bilges, engine room and
\ncertain boiler spaces, vessel sections and landside confined and enclosed spaces) unless
\nthey have been tested by the competent person and determined to contain concentration
\nof flammable vapours or gases within the permissible limit. Workers performing any type
\nof metal cutting, should wear suitable eye protective equipment as well as appropriate
\nhand and body protective clothing or equipment.
\nIf the noise level produced by metal cutting machine is above 100 decibels, efforts
\nshould be made to make it feasible to reduce it below the maximum limit. If not feasible,
\nthen workers should be provided personal protective equipment. Metal cutting should be
\n35
\nperformed in a confined space having sufficient ventilation and required means of access
\nto the space for the workers. Workers cutting the metals containing toxic materials must
\nwear filter type respirators. (\u201cA Guide for Ship, 2000\u201d, pp. 7-1 \u2013 7-14).
\n3.5 Gap between existing and standard practices of ship recycling
\nShip recycling is really an action of hazardous waste disposal and needs to be
\ndone properly i.e. under standard procedures. If done as per the standard procedures
\nexplained above in detail, the cost of scrapping becomes expensive and the business
\nbecomes unprofitable due to low margin and high competition in the ship recycling
\nindustry. The ship owners\/ship brokers\/cash buyers finalise the deal with the ship
\nrecycling yard offering the highest price in the international\/global market. Ship recycling
\nyards running with marginal profit in the volatile and competitive market, are not ready to
\nmake investment for the long term but they are trying to take advantage of the existing
\nship recycling market. The market always has the probability to shift to a new destination
\nin case of regulations enforced strictly by the ship recycling states or due to any other
\ninfluencing reason. If the existing ship recycling states ratify the IMO\u201fs Ship Recycling
\nConvention, 2009, even then no one can guarantee to achieve the ultimate goal of green
\nship recycling due to probability of shifting the industry elsewhere. If the industry shifts
\nto states like Somalia then the situation can be worse.
\nAs explained above, ships contain hazardous materials and toxic waste.
\nAccording to the first law of thermodynamics, a pollution-free product is not possible and
\neconomic activities are possible only at the cost of the environment. The industry has to
\nmake a balance between the two: ecology and economics (Ma, 2002, p. 400). As more
\nthan 90% of world tonnage is carried through the sea, it is impossible to think about the
\nglobal trade without shipping having the cheapest transportation cost for bulk cargo and
\nthe least pollution among all the modes of transport. But shipping sector has not done
\nefforts sufficiently to control the pollution in comparison to air traffic and road transport.
\nThe pollution from ships needs to be controlled to have a good balance up to a possible
\nextent and International Maritime Organisation (IMO) is making efforts in this regard for
\n36
\nlast four decades. Hong Kong International Convention on Ship Recycling, 2009 is in line
\nwith it.
\nShip recycling can be said to be an externality as it poses danger to human life
\nand the environment. As this externality is negative and not possible to be compensated
\nfor, the external cost needs to be paid for in the form of compensation. In the present
\nsituation, ship owners are ultimately responsible for scrapping of their ships and they
\nshould bear the external cost for this negative externality in the form of compensation.
\nBut in actuality, in place of paying the external cost for internalising the negative
\nexternalities, ship owners are getting money for their ships to be recycled. As they are
\nultimately responsible for disposal of hazardous materials and toxic wastes present in the
\nships, they should be asked to bear the difference between the costs under existing
\nprocedures of scrapping and standard procedures explained above in detail. In developed
\ncountries, such system already exists for disposal of many wastes like computers\/cars.
\nFor dismantling such wastes through standard practices, the owner has to pay the cost. In
\nGermany, the process is initiated on the occasion of registration of a new car to arrange
\nthe fund for its green dismantling at the end of its economic life. For achieving the goal
\nof green ship recycling such steps can be taken.
\nFurther, it can be said that even the external cost compensated by the ship owners
\nwill be a compromise with the loss to the human beings and the environment. But for the
\nsake of economic activity, internalization of such negative externalities can be accepted.
\nHowever, the \u201cLawrence Summers10\u201d criterion should not be applied for the toxic waste
\ntrade like ship recycling. As per this criterion, the pollution should be sent to the places
\nwhere there are no people or where the people are poor since it will have the lowest cost
\nin the countries having lowest wages (Demaria, 2010, p.251). This principle of lowering
\nthe internalization cost of externalities does not match with the principles of economics of
\nsafety and environment. As per the principles of economics of safety and environment,
\nefficient allocation of resources can not be left to the market (Ma, 2002, pp. 404-405).
\nOut of the three main approaches suggested to deal with externality problem, the proven<\/p>\n
10 Lawrence Summers, the then chief economist at the World Bank in 1991.
\n37
\nmethod of intervention through appropriate rules and regulations, appears the best choice
\nfor managing the negative externalities of ship recycling. The maritime sector being
\ninternational, inter-governmental organisations should come forward with a permanent
\nsolution to achieve the ultimate goal of green ship recycling. The issue will be discussed
\nfurther in the fifth chapter after analysis in the third chapter, of the guidelines issued by
\ninternational organisations on the subject.
\n38
\nCHAPTER-4
\nRegulations\/Guidelines on ship recycling
\n4.1 The environmental issue: Ship recycling
\nThe shipping sector has a great role in globalization of the world trade. Provision
\nof logistics facilities and clustering of industrial units in the vicinity of ports are the best
\nexample showing its importance. The share of transportation cost in the total cost of a
\nproduct has now increased due to transportation of unfinished goods from one place to
\nanother before finishing; on the other hand, the share of production cost has declined by
\navailing the comparative advantage for a product. To manage the growth in maritime
\ntransportation due to decentralization of industries, the world merchant fleet increased
\nrapidly. But this increase in the world fleet affected various issues like safety of life and
\nthe environment. During the last two decades, environmental issues have taken on a new
\nlevel of recognition on the international platform. The issues like ship recycling, air
\npollution due to emission of sulphur and carbon dioxide from ships and ballast water
\ncausing ecosystem imbalance, drew attention of the world. The Basel Convention, 1989,
\nthe Vienna Convention, 1985, ILO\u201fs Conventions on Occupational Safety and Health,
\nAsbestos, Chemicals and MARPOL, 1973\/1978 are some examples of awareness about
\nthe safety of human beings and the environment. The controversial cases of ship
\nrecycling like the Otapan, the Sea Beirut, the Sandrine, the Margaret Hill, the Tor Anglia
\nand the Onyx, drew the attention of international organizations and NGOs towards transboundary movements of hazardous materials affecting the human and environmental
\nsafety. IMO which is primarily concerned with human safety and the environment, has
\nalready taken initiatives for environmental safety, health and welfare matters relating to
\nthe ship recycling industry. Guidelines in this regard have been issued from time to time
\nby the Organization. The IMO Marine Environmental Protection Committee at its fortysecond session (MEPC 42) in 1998 agreed that IMO has an important role to play in ship
\nrecycling, including preparatory work before commencement of ship recycling and a
\ncoordinating role towards the ILO and the Basel Convention in recycling matters
\n(Mikelis, 2006, p. 2).
\n39
\n4.2 Adoption of the Hong Kong Convention, 2009
\nFor proper implementation of the regulations by the contracting states for safe,
\nsound and environmentally friendly recycling of ships, the IMO has adopted the
\nInternational Convention on Safe and Environmentally Sound Recycling of Ships, 2009
\nin its Diplomatic Conference held in Hong Kong on 11 May, 2009. The European Union
\nand many other countries widely welcomed the Convention as it reflected the
\nresponsibility of ship owners just from the time of construction of the ship to its
\ndemolition along with various actions required to be approved by the flag states and
\nauthorities in ship recycling nations for monitoring of recycling activities. Particularly the
\nhandling of hazardous materials from the construction to demolition stage has been
\nappreciated. It has been found a good attempt of IMO towards human and environmental
\nsafety as it has taken the issue on the international platform for its proper recognition by
\nthe countries not serious about the issue (\u201cThe Hong Kong ship\u201d, 2010, p. 23).
\nThe Convention explains about the Environmentally Sound Management (ESM)
\nof hazardous materials on board ships. Regulations 20.3 and 20.4 of the Convention
\ncover the issues like ensuring safety and ESM of all hazardous materials and wastes,
\nidentifying waste management and transfer of wastes to the authorised management
\nfacilities (Wingfield, 2011, p. 11). The relationship of the Ship Recycling Convention
\nwith other international conventions\/agreements has been covered under Article-15. As
\nper the provision of Article 15.1, the Convention shall not prejudice the rights and
\nobligations of any state under the United Nations Convention on the Law of the Sea
\n(UNCLOS) and under the customary international law of the sea. Similarly, as per Article
\n15.2, the Convention shall not prejudice the rights and obligations of parties under other
\nrelevant and applicable international agreements.
\n40
\n4.3 Hong Kong Convention and its enforcement
\nThe Convention was open for signature by any state at the Headquarters of the
\nOrganization from 1st September, 2009 to 31st August, 2010 and shall now be open for
\naccession by any state. Till now sixty states have signed the Convention including
\nTurkey, one of the five main ship recycling states (Beck, 2010, p. 1). The Convention
\nshall enter into force 24 months after the date on which the following conditions (Article17) are met:
\n(i) not less than 15 States have either signed it without reservation as to
\nratification, acceptance or approval, or have deposited the requisite instrument
\nof ratification, acceptance, approval or accession in accordance with Article
\n16;
\n(ii) the combined merchant fleets of the States mentioned in point (i) above
\nconstitute not less than 40 per cent of the gross tonnage of the world\u201fs
\nmerchant shipping (i.e. at least 383,192,922 GT considering the gross tonnage
\nof 2010 which is 957,982,304 GT); and
\n(iii) the combined maximum annual ship recycling volume of the States mentioned
\nin point (i) above, during the preceding 10 years constitutes not less than 3
\nper cent of the gross tonnage of the combined merchant shipping of the same
\nStates (i.e. at least 11,495,788 GT for the period 2001 to 2010).
\n[The Hong Kong International Convention for the Safe and Environmentally Sound
\nRecycling of Ships (2009)]
\nThe first two conditions of the Convention are easy to be fulfilled as European
\nUnion members and the OECD members have consensus to sign and enforce the
\nConvention. The combined maritime merchant fleet of these states (European Union
\nhaving 23% of total world tonnage) constitutes at least 40% of the world\u201fs total merchant
\nfleet (Chang, Wang & Durak, 2010, p. 1395). To fulfil the third condition, the main ship
\nrecycling states, recycling 97-98% of the world\u201fs total recycling tonnage, have to come
\nforward to ratify the Convention. As mentioned above, out of the five main ship recycling
\nstates, Turkey has signed the Convention. But the larger recycling capacity exists with
\n41
\nChina (7.7 million GT), India (7.6 million GT) and Bangladesh (6.8 million GT),
\nPakistan having medium (2.4 million GT) and Turkey having the smallest capacity (0.7
\nmillion GT) (Mikelis, 2010, pp. 28-29). After 24 months from the accession by the two
\nlarge recycling capacity states out of the three, the Convention can enter into force. China
\nhas initiated action for standardization of its recycling activities and new yards with
\nappropriate infrastructural facilities are either under construction or have already been
\ncompleted. It is expected that China may ratify the Convention early. But India and
\nBangladesh may take some time to ratify the Convention, which will cause delay in the
\nenforcement of the Convention anticipated by 2015 at the earliest (\u201cStudy in relation\u201d,
\n2009, p. 6).
\nAs the conditions for entry into force of the Convention will take some time, IMO
\nmember states have been requested (by Resolution 5 of the Hong Kong Diplomatic
\nConference, see Appendix A) to consider applying the technical requirements of the
\nConvention during the interim period (Mikelis, 2011, pp. 4-11). For implementation of
\nthe technical requirements voluntarily by the ship recycling states, IMO is continuously
\nmaking efforts to have discussion between the ship recycling facilities and the states
\nconcerned. The Pattaya Workshop organized in May, 2010 is an effort in this direction,
\nwhich was represented by the Ship Recycling Associations and Administration from the
\nmain five ship recycling states, International Ship Owners\u201f Associations along with the
\nexperts from UN bodies, IGOs and NGOs (Mikelis, 2010, p. 33). The voluntary
\nimplementation of technical requirements proposed under the Convention has been
\nwelcomed by the International Ship Owners\u201f Associations like ICS, BIMCO,
\nINTERTANKO and their ships joining the fleet, have started to maintain the Inventory of
\nHazardous Materials in line with the provision under the Convention.
\n42
\n4.4 Structure of the Convention
\nThe Convention can be divided into three parts: the first part containing 21
\nArticles establishing the main legal mechanism, the second part having 25 regulations
\nexplaining technical requirements and the third part containing appendices. Regulations
\ncan be divided into four parts as follows:
\n(i) General provisions (Regulations 1-3): Under the general provisions, the
\ndefinitions of the terms used, general applicability of the provisions and
\nrelationship with other standards, recommendations\/guidelines issued on the
\nsubject, have been covered.
\n(ii) Requirements for ships in service (Regulations 4-14): The states, party to
\nthe Convention have been assigned the responsibility to ensure that the
\nhazardous materials listed in Appendix-1 of the Convention (see Appendix B)
\nare not utilized by their shipyards. Along with ensuring the above, the party
\nstates have also to ensure that these hazardous materials are not installed on
\ntheir ships. All their ships will have to carry throughout their operational life,
\nan Inventory of Hazardous Materials (IHM) quantifying the materials listed in
\nAppendices 1 & 2 of the Convention (Appendix 2 of the Convention, see
\nAppendix C). In case of installations of the materials listed in Appendix-2 of
\nthe Convention, the Inventory of Hazardous Materials is to be updated. After
\neach 5 years, the ships of the party states will undergo a survey to verify their
\nIHM quantity and then issue an International Certificate on Inventory of
\nHazardous Materials. Further, it is binding on the flag states, party to the
\nConvention that their ships will be recycled in the recycling facilities of the
\nparty states only.
\n(iii) Requirements for ship recycling facilities (Regulations 15-23): The
\nship recycling facility selected by the ship owner should be a facility
\nauthorised by a party state, capable of handling the hazardous materials
\nshown in the IHM of the ship. After receiving the ship recycling plan from
\nthe ship recycling facility11, the ship owner has to arrange the final survey of<\/p>\n
11 A defined area that is a site, yard or facility used for the recycling of ships.
\n43
\nthe ship for verification of the Inventory of Hazardous Materials and the Ship
\nRecycling Plan for disposal of hazardous materials shown in the inventory,
\nbefore obtaining the International Ready for Recycling Certificate from the
\nflag state.
\nA Ship Recycling Facility Plan is to be developed and
\nimplemented by the Ship Recycling Facility. This plan will cover workers\u201f
\nsafety and training, protection of human health and the environment, role and
\nresponsibilities of personnel, emergency preparedness and response, systems
\nfor monitoring, reporting and record-keeping. The Ship Recycling Facility
\nwill be authorized by the state, party to the Convention, and validity of the
\nauthorization will be maximum 5 years. Ship Recycling Facility will have to
\naccept those ships only that are authorized to be recycled and also meet the
\nrequirements complying with the Convention.
\nAfter finalization of a deal with a ship owner, the Ship Recycling
\nFacility has to develop a Ship-specific Recycling Plan on the basis of the
\ninformation provided by the ship owner. Then, a notification containing the
\nname of the Competent Authority for intent of the Ship Recycling Facility and
\ndetails of the ship, its owner, Inventory of Hazardous Materials and the draft
\nShip Recycling Plan, is be issued by the Ship Recycling Facility. The Ship
\nRecycling Plan prepared by the Ship Recycling Facility will then be approved
\nby the Competent Authority concerned before handing it over to the ship for
\nits final survey. After final survey, the ship will acquire the International
\nReady for Recycling Certificate, which will be submitted to the Ship
\nRecycling Facility. Then, the Ship Recycling Facility will report to its
\nCompetent Authority about the planned start of recycling.
\n(iv) Reporting requirements (Regulations 24-25): The ship recycling state, a
\nparty to the Convention, has to make regulations conforming to the provisions
\nmade in the Convention. The state has to designate one or more competent
\nauthorities who will develop a mechanism for authorizing ship recycling plans
\nand ensuring compliance of the Convention.
\n44
\nIn the last part of the Convention, there are 7 appendices containing lists of
\nhazardous materials, formats for certification and document of Authentication to
\nundertake ship recycling (Mikelis, 2010, pp. 14-23).
\n4.5 Analysis of the Convention
\nAs explained above, the Hong Kong Convention has been appreciated as a right
\napproach to control the use of hazardous materials in ships but as per the critics, two
\naspects could not be covered properly under the Convention i.e. beaching and precleaning. In support of beaching, IMO has argued that 75% of world ship recycling is
\ndone on beaches; therefore, in place of taking up the beaching issue, ship recycling
\nactivities have been focused upon. The Convention has the intention to standardise ship
\nrecycling throughout the world by concentration upon human safety and environmental
\naspects through proper training of workers, implementation of safety measures and their
\nmonitoring along with the record management to be done by the authority appointed by
\nthe party state.
\nRegarding pre-cleaning work, critics say that it should be the responsibility of the
\nflag state to first do the pre-cleaning work and after removing all the possible hazardous
\nwastes, the ship is to be handed over to the ship recycling yards. The NGOs are taking the
\nexample of the chemical tanker (Otapan principles) which spent nine years in the
\nNetherlands and was pre-cleaned before the final voyage to Turkey. NGOs are calling on
\nthe flag states to follow this precedence and make ship owners liable for breaking of
\nships. Further, it has been stated that Regulation 20 (read with Regulations 10 &11) of the
\nConvention mentions safe and environmentally sound management of hazardous
\nmaterials but it does not clearly mention the place where pre-cleaning work will be doneeither in the exporting country or importing country. As importing countries for recycling
\nof ships are lacking in handling hazardous materials in terms of technical and mechanical
\nfacilities, pre-cleaning work has been suggested by the critics to be done in the exporting
\ncountries.
\n45
\nOn the contrary, it has been argued by the IMO that after pre-cleaning of the
\nhazardous materials, the ship becomes unseaworthy and then it will perhaps not be
\nfeasible to tow away the ship a good distance for recycling in Asian countries. As stated
\nin the Convention, pre-cleaning work can be done at the facility capable and authorized
\nfor the Inventory of Hazardous Materials of a ship (Mikelis, 2010, pp. 35-37). This
\nprovision may encourage the ship recycling facilities to make them capable of precleaning activities to avoid the risk of customer loss. But pre-cleaning work at the ship
\nrecycling facilities attracts the controversial issue of trans-boundary movement of
\nhazardous materials used in ships.
\nThe issue of hazardous materials and its movement is a hot topic (sample nursing essay examples by the best nursing assignment writing service) for debate on
\ninternational platforms for a long time. The Basel Convention, adopted under the United
\nNations Environmental Programme in March, 1989 deals with trans-boundary movement
\nof hazardous wastes but not directly related to ship recycling. The Convention covers
\nEnvironmentally Sound Management (ESM) of hazardous wastes (Article-4) such as
\nminimising generation of hazardous wastes, availability of adequate waste disposal
\nfacilities, prevention of pollution and minimising the consequences on human health and
\nthe environment, authorising the disposal of hazardous wastes (Wingfield, 2011, p. 12).
\nThe exporting state has been considered responsible under Article 2(10) of the
\nConvention for the planned trans-boundary movement of hazardous wastes. The aim and
\nobjectives of the Convention are as follows:
\n(i) To reduce trans-boundary movements of hazardous wastes and other
\nwastes ;
\n(ii) To dispose of the hazardous wastes and other wastes generated, as close as
\npossible to their source of generation;
\n(iii) To minimise generation of hazardous wastes in terms of quantity and
\nhazardousness;
\n(iv) To ensure strict control over movements of hazardous wastes across
\nborders;
\n46
\n(v) To prohibit shipments of hazardous wastes to countries lacking the
\ncapacity to manage and dispose of in an environmentally sound manner;
\n(vi) To Help developing countries in the environmentally sound management
\nof hazardous and other wastes generated by them.<\/p>\n
The hazardous wastes which are explosive, flammable, poisonous, infectious,
\ncorrosive and toxic\/eco-toxic are covered under the Convention. The
\npolluter\/generator12\/owner of the hazardous wastes is considered responsible for its safe
\ndisposal under the Basel Convention.The Convention prohibits its parties to send
\nhazardous wastes to be recycled to the non-OECD states. If a ship to be recycled is
\nconsidered as hazardous waste, prior notification and consent is required for its transboundary movement, as per the Convention [Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and Their Disposal, (1989)]. There are 177
\ncountries party to the Convention, including Iraq and Palau, the recent members. Till
\nnow, 70 parties have ratified the Ban Amendment to the Basel Convention, Zambia being
\nthe most recent and 10 parties have ratified the Basel Protocol on Liability and
\nCompensation (Basel Convention Bulletin, 2011, p. 6). All the members of the European
\nUnion, party to the Convention have decided through Council Decision 97\/640\/EC not to
\nexport the hazardous wastes to non-OECD states (\u201cUK Ship Recycling\u201d, 2007, p. 27).
\nThe European Union appears to prohibit its ships to recycle in Asian countries unless it
\nhas pre-cleaned hazardous materials. In line with the Basel Convention, United Nations
\nHuman Rights Commission, set up in 1995, adopted a resolution on adverse effects of
\nhazardous wastes. Further investigation was done by the Commission on the subject and
\nin its report ship recycling was considered as waste trafficking and it was suggested to
\nconsider ships as hazardous waste (Hossain and Islam, 2006, p. 42).
\nOn the contrary, the Hong Kong Convention does not consider the ship ready for
\nrecycling as hazardous waste. As stated above, the issue of considering ships ready for<\/p>\n
12 \u201cGenerator\u201d means any person whose activity produces hazardous wastes or other wastes or, if that
\nperson is not known, the person who is in possession and\/or control of those wastes- Basel ConventionArticle-2.
\n47
\nthe last voyage, as a hazardous waste, created controversy and parties on different footing
\ninterpreted it differently. Without going into this controversy, it is a fact that the
\nresponsibility for disposal of hazardous materials present in ships lies with the ship
\nowners and it is the responsibility of the ship owners to ensure that their ships are
\nrecycled in a manner complying with the standard practices prescribed under
\ninternational rules and regulations\/conventions. The International Chamber of Shipping
\n(ICS) has taken initiatives in this regard and in August, 2001, established an Industry
\nCode of Practice on ship recycling. The aim of the Code is to encourage ship
\nowners\/shipping companies to initiate a programme to identify and record the hazardous
\nmaterials on their existing ships and to minimize the amount of potentially hazardous
\nmaterials on board the ship (Parkinson, 200513). The International Labour Organisation,
\nthe first specialised agency of the United Nations focusing on labour rights, has also put
\nemphasis on minimum utilisation of hazardous materials on board the ships (Hossain and
\nIslam, 2006, pp. 41-42).
\nThe steps taken by ICS and ILO towards minimum utilisation of hazardous
\nmaterials are really helpful in achieving the target of green ship recycling but it will have
\nan impact in the long run i.e. after 20-25 years. To tackle the present situation prevailing
\nin the ship recycling industry, immediate concrete steps need to be taken. The European
\nUnion is very keen on finding a solution to this problem and from time to time
\nresolutions are passed by them to make the efforts successful. As stated above, ships
\nregistered in European Union member states (party to the Basel Convention) would be
\nprohibited for recycling in the Asian ship recycling facilities unless they are considered
\nnon-hazardous after pre-cleaning or they change their flags. As selling of ships is a purely
\ncommercial decision, there is always a possibility that the ship owners change the flags of
\ntheir ships for a better deal. By choosing the flag of a state not party to the Convention,
\nthe ship owner will then be free to sell his ships to any ship recycling facility to get the
\nbest price.
\nEven after the entry into force of the Ship Recycling Convention, there is a
\npossibility of two distinct ship recycling markets running parallel, one i.e. conventional<\/p>\n
13 Page number not available but placed as executive summary after the slides.
\n48
\nmarket for the ships which comply with the Ship Recycling Convention and another i.e.
\nnon-conventional market for ships not complying with the Ship Recycling Convention
\n(Knapp, Kumar and Remjin, 2008, pp. 1023-1024). As green ship recycling is always
\nexpensive requiring standard methods along with proper infrastructure and trained
\nworkers with appropriate equipment, the ship owners may shift to the non-conventional
\nmarket defeating the purpose of the Hong Kong Convention.
\nThere may also be the scene that many states do not ratify the Hong Kong
\nConvention to favour their ship owners. Then the non-conventional market will definitely
\nbe bigger than the conventional market which will not only be detrimental to the human
\nbeing but also to the environment. If the major ship recycling states like Bangladesh,
\nIndia and Pakistan do not ratify the Hong Kong Convention, then also the possibility of
\nthe non-conventional market being bigger than the conventional market can not be
\nignored.
\nAs explained earlier, even after formulation of the guidelines from time to time on
\nship recycling, the target of green ship recycling could not be achieved but the market
\ncould shift from one place to another. The \u201eIndustry Code of Practice on Ship Recycling\u201f
\nintroduced in August, 2001 by Ship Owners\u201f Associations and led by ICS, could not get
\nthe expected result either. In this open world market, ship owners are not ready to bother
\nabout the recycling activities after selling their ships, but they are only interested in the
\nbest price of their ships. Sometimes they even do not know where their ships have gone
\nfor recycling as buyers of these ships for recycling are normally the cash buyers who
\nfinalise the deal with the ship recycling yards.
\nOn the other hand, ship recycling yards are always keen on earning the maximum
\nprofit from the business. They are ready to ignore even the safety rules and regulations
\nissued on the subject by the state concerned. Ship recycling states either do not have
\nsufficient guidelines\/regulations on the subject or do not have strict implementation of the
\nexisting regulations. The Ship recycling industry is flourishing in such states having
\ncheaper man-power. After strict compliance with the regulations, the activity becomes
\ncostlier in comparison to the parallel markets, so the industry starts shifting to the
\ndestination that is favourable for profit earning.
\n49
\nAll the developments in the past indicate that there is a permanent solution
\nrequired to tackle the status quo situation of the ship recycling industry for the past three
\ndecades. Ship owners are the prime stakeholders responsible for disposal of hazardous
\nmaterials existing in their ships, as per Article-2 of the Basel Convention. But as already
\ndiscussed, they are not willing to accept such burden. Monitoring of the activities of ship
\nowners by any international organisation is also a difficult task.
\nFurther, green ship recycling is always costly and there is no incentive for opting
\nsuch standard practices requiring investment on infrastructure, training and equipment. In
\nthe USA and Europe, income from the ship\u201fs scrap is not even sufficient to meet the
\nexpenditure on ship recycling (Finn, 200514). The European Council is planning to
\ngenerate a fund to meet the expenditure on green ship recycling (\u201cStudy in relation\u201d,
\n2009, pp. 6-7). For disposal of vehicles, Germany has created a fund, starting
\ncontribution from the stage of registration of the vehicle. In case of ships\u201f recycling also,
\nsuch arrangements can be done. In real sense, the ship at the end of its life is nothing else
\nthan waste and like other wastes, the honour\/generator of this waste should take care of
\nits disposal in a standard manner. If they are not in a position to do so directly, they can
\ndevelop a system to run it properly. For example, to protect themselves from the
\nenormous liability due to collision of the ships, ship owners established the \u201eProtection
\nand Indemnity Insurance Club\u201f (P & I Club). The P & I Club is a non-profit making
\nmutual insurance association providing coverage for its ship owners and charter members
\nagainst third party liabilities relating to the use and operation of commercial vessels. This
\ndevelopment could be initiated after the judgement of the collision case, \u201eD Vaux v
\nSalvador\u201f given by an English court in 1836 that the ordinary policy against perils of the
\nsea can not cover the damage done to another vessel by collision (\u201cThe story of P& I\u201d,
\n2011). It can be derived from the example that after getting a bigger liability, ship owners
\nformulated a system i.e. P & I Club to tackle such liabilities. If ship owners are also made
\nresponsible for green recycling of their ships, there is a possibility of evolving a new
\nsystem improving the situation. A club\/society constituted by the ship owners can do the
\njob in an efficient and effective manner with the help of a \u201eShip Recycling Fund\u201f<\/p>\n
14 Page number not available but placed as executive summary after the slides.
\n50
\nproposed to be created to meet the additional financial burden due to green ship recycling
\npractices. A detailed discussion will be done on this proposed line of action in the next
\nchapter.
\n51
\nCHAPTER- 5
\nShip Recycling Fund: An Incentive Scheme
\n5.1 Background
\nMaritime transport is a derived demand from world trade. Transportation of goods
\nfrom one place to another is needed to facilitate the trade. As stated in the first law of
\nthermo-dynamics, a product can not be pollution-free totally and maritime transport also
\nis not an exception. But for taking the benefit of transportation, the world has to accept
\nthe pollution generated by it. One thing that can be done, is the selection of the best
\noption to minimise the pollution. Among all the modes of transportation, shipping is the
\ncheapest and most eco-friendly mode for bulk cargo and acquisition of ships is required
\nfor transportation of goods\/cargo through this mode. Ships are required to be disposed of
\nat the end of their economic life. As ships contain different types of hazardous materials,
\non the occasion of scrapping these materials need due care and proper handling. The
\nhazardous effects of these materials on human being and the environment can be
\nminimised by following the standard procedures of recycling.
\nDue to the pollution caused to the environment and threats to the human being,
\nship recycling is considered as a negative externality. As per the market principles, to
\ninternalise this negative externality, a provision of compensation is needed. In place of
\npaying the compensation to the ship recycling facilities for internalizing such a negative
\nexternality, ship owners are getting money for their ships. Ship recycling yards are paying
\nthe money with the intention to scrap the ships in a sub-standard manner. The owners of
\nthe ships also know about this; in other words, they are not serious about green recycling
\nof their ships. They know that in case of recycling of their ships in a standard\/proper
\nmanner they can not get a penny from the sale of their ships but they might have to pay
\neven money to the yards. It would not be wrong to say that ship owners intentionally
\nshow unwillingness in the green method of recycling to get money from the sale of their
\nships to be recycled. As stated above, ship owners, not the ship recycling facilities, are
\nthe owners\/generators of the hazardous materials and toxic wastes received under the
\nprocess of ship recycling and to internalise this externality, they should pay the
\n52
\ncompensation to the ship recycling facilities\/states concerned. Payment of money by ship
\nrecycling yards in place of the compensation for internalising this negative externality, is
\nreally against the \u201epolluter pays\u201f principle. As per the Basel Convention, ship owners
\nbeing the owner\/generator of hazardous materials and toxic wastes used in ships, are
\nsupposed to monitor its disposal by the ship recycling facilities in a proper way. It can
\ntherefore, be said that ship owners are the key stakeholder for green ship recycling and
\ninitiatives taken by them will have great impact on the industry. If they are assigned the
\nresponsibility of green recycling of their ships and provision is made for submission of
\nsuch certificate by them compulsorily after completion of pre-cleaning and recycling
\nexercise, then the scenario will definitely change.
\nThe guidelines\/conventions issues from time to time on ship recycling ask about
\nthe procedure to be followed by the stakeholders but neither the owners of the ships, nor
\nthe ship recycling yards are following the procedures laid down in these
\nguidelines\/conventions. Before adoption of the Hong Kong Convention by the IMO, there
\nwere guidelines issued by the international organisations from time to time for the
\nstakeholders i.e. ship owners, flag states, ship recycling facilities and concerned states,
\nbut the stakeholders are not willing to comply with these guidelines. Even after
\nenforcement of the Hong Kong Convention, it is not confirmed that the stakeholders of
\nthe industry will follow the procedures indicated under the Convention. Therefore, along
\nwith formulation of conventions\/guidelines on the subject, it is required also to analyse
\nthe response from its stakeholders on such conventions\/guidelines. It is a fact that even
\nafter the guidelines on the subject, the situation has been status quo for a long time, which
\nsuggests the need to thoroughly investigate to find its root cause together with the
\nsolution.
\n5.2 Cost a barrier in green ship recycling
\nAs appears prima facie, the cost difference between the conventional and standard
\nmethods of ship recycling is the main barrier in achieving the goal of green ship
\nrecycling. The standard procedure of recycling causes additional expenditure in scrapping
\nexercise; as a result, the profit margin of ship recycling facilities is reduced which also
\n53
\naffects the ship owners, getting a lower price and sometimes no money for their ships to
\nbe recycled. As there is no incentive available to cover the gap between the cost of
\nconventional and standard methods of recycling, ship recycling industry is not willing to
\nopt for the standard method. As discussed earlier, ship owners also are interested in the
\nmoney to be received from the sale of their ships to be recycled. To make the standard
\nmethod of recycling acceptable by the ship recycling industry, a fund needs to be
\narranged for the provision of incentive to meet the additional cost to be arisen due to
\nstandard methods of green ship recycling. The additional cost due to the standard method
\nof recycling has the following elements:
\n(i) The cost involved in removal of structural components requiring special
\ntreatment:
\nThe cost for each of the elements of scrapping is different for different types
\nof ships. Further, the actual cost separately for such elements, is difficult to
\nknow as most of these activities are done simultaneously on the occasion of
\nscrapping. Ship recycling yards are not ready to calculate separately the
\nexpenses under each head and disclose the same. As per the report prepared in
\nApril, 1998 by US Ship Scrapping Inter-agency Panel, an amount of US$145
\nmillion was required for scrapping of 111 US Navy vessels. Out of US$145
\nmillion, the expenditure on removal and disposal of the structural components
\nhad been estimated at US$110 million (average US$1 million per ship).
\nECORYS, a consultation company conducting a study on ship breaking
\nfor the NGO, Greenpeace, also has taken the figures from a ship owner opting
\nfor pre-cleaning before scrapping of the ship in a Chinese yard. According to
\nthis source, the total pre-cleaning cost was in the order of US$20-40\/Light
\nDisplacement Ton (LDT) including the expenses on removal of structural
\nelements of the ship. Taking the ratio the same as shown for US Navy
\nvessels, the expenses on removal of structural elements from ships comes to
\nUS$15-30\/LDT. A U.S. ship yard, involved in scrapping of ships in a
\nstandard manner, has also confirmed this cost estimated for different types of
\nships as follows:
\n54
\nWar ships US$ 900-1300 per LDT*
\nMilitary support vessels US$ 300- 700 per LDT*
\nCommercial vessels US$ 100- 500 per LDT*
\n*Including both remediation (removal and disposal of hazardous wastes) and
\ndismantling costs. Remediation cost estimated at one-third to half of the total
\ncost includes labour, materials and disposal costs.
\n(ii) The cost of removing operational waste generated within ship\u2019s
\noperational period:
\nUnder this heading, the expenditure on making the ships for hot work by tankcleaning or making it gas-free, costs for removal of engine room wastes,
\nhydraulics, are to be considered. This expenditure has been estimated to onethird of the total pre-cleaning work. In container ships, the cost has been
\nestimated at US$ 5-10\/LDT. Tankers and liquid bulk carriers have
\nconsiderably higher costs.
\n(iii) The cost involved in improving the capacity of the ship recycling yards to
\nrecycle the ships in a standard manner:
\nShip recycling activities are normally done on beaches. Yards are running
\nwithout having permanent structures and proper training for handling of
\nhazardous materials\/toxic wastes. For green ship recycling, there is a
\nrequirement for physical infra-structures, waste reception facilities, dry
\ndocking facilities, appropriate training to workers for handling of hazardous
\nmaterials and proper equipment as per suitability of the work. All these
\nfacilities need investment and after such investment the recycling cost will be
\nhigher.
\n55
\n(iv) The cost involved in making the yards able to deal with the on-board
\ngenerated wastes:
\nShip recycling yards are normally not serious about disposal of the hazardous
\nwastes received from recycling of ships but the same are handed over to any
\none ready to pay or are disposed of in the sea\/on the land. There is no facility
\nin the vicinity of the ship recycling yards to deal with these hazardous
\nmaterials and toxic wastes. For such facility, the yards have to take initiatives
\nwith the support of the states concerned to invite companies and co-operate
\nwith them in disposal of such wastes in a proper manner.
\nIn this way, one can say that the costs for standard method of ship recycling is
\nhigher due to additional facilities required for disposal of wastes in a proper manner and
\nsafety norms to be followed by workers. It has been calculated to US$ 10-40\/LDT, as per
\nthe estimation for scrapping a container ship in a Chinese yard. The cost for some types
\nof ships, like tanker and reefer ships may be higher. To cover certain investment items for
\nyards not considered, the overall cost for estimation of the Ship Recycling Fund has been
\ntaken up at US$ 25-50\/LDT (\u201cThe Ship Recycling Fund\u201d, 2005, pp. 19-23).
\nFor estimation of the total requirement for the Ship Recycling Fund, the second
\nfactor required to be known, is the supply of ships for recycling in the world market. The
\nglobal ship recycling volume and recycling project ( help with nursing paper writing from experts with MSN & DNP degrees)ed by the World Bank for 2010-2030
\nis given in Figure-6.
\n56
\nFigure 6- Global recycling volumes 2000-2009 and project ( help with nursing paper writing from experts with MSN & DNP degrees)ed recycling 2010-2030 in
\nmillion GT (2010 marked)
\nSource: World Bank Report (Unpublished) on ship breaking in South Asia, November 17, 2010. p. 34
\nAs per the World Bank Report, 2010 (unpublished), the maritime sector enjoyed
\nhigh freight rate during 2005-2008 and the scrapping market slashed down during the
\nperiod due to operation of even older ships. However, operation of the older ships to
\ncover the high demand during the period increased the ship recycling volume in the years
\n2009-2011 after the recession in the world trade. Further, the phasing out of single hull
\n2000
\n2001
\n2002
\n2003
\n2004
\n2005
\n2006
\n2007
\n2008
\n2009
\n2010
\n2011
\n2012
\n2013
\n2014
\n2015
\n2016
\n2017
\n2018
\n2019
\n2020
\n2021
\n2022
\n2023
\n2024
\n2025
\n2026
\n2027
\n2028
\n2029
\n2030
\n13
\n15
\n17
\n16
\n7
\n3.5
\n4.5
\n4
\n8
\n26.5
\n27
\n23
\n11.5
\n9.5
\n10
\n10.5
\n11
\n11.5
\n12
\n12.5
\n13
\n13.5
\n14
\n14.5
\n15
\n15.5
\n16.5
\n17.5
\n18
\n18.5
\n19
\n0 5 10 15 20 25 30
\n0% 20% 40% 60% 80% 100%
\nmillion GT\/year
\nY
\ne
\na
\nr
\n57
\ntankers also, made an addition to the volume for the years 2009-2012. The balance of
\nbacklog and single hull phase out has been divided among the main ship recycling states
\n(see Table 7) as per their share and the scrap tonnage distribution based on 2008 data
\n(World Bank Report, 2010, Unpublished, p. 34) among Bangladesh, India and Pakistan
\nfor the period 2010-2030.
\nTable 7- Tonnage scrapped globally and in Bangladesh, India and Pakistan, 2010-2030
\nAccumulated tonnage scrapped 2010-2030 (million GT)
\nLocation Distribution based on 2008 data Distribution based on 2000-2008 data
\nGlobal
\nBangladesh
\nIndia
\nPakistan
\n320.0
\n162.0
\n95.2
\n10.2
\n388.0
\n130.0
\n132.0
\n22.9
\nSource: World Bank Report (Unpublished) on ship breaking in South Asia, November 17, 2010. p. 34
\n5.3 Estimation of Ship Recycling Fund
\nBefore taking any step to constitute the Ship Recycling Fund, one has to first
\ncalculate the annual demand for such fund. The average annual fund requirement for ship
\nrecycling can be calculated on the basis of the ship supply forecasted for the coming
\nyears (shown in Figure 6). As mentioned above, the additional cost due to the green ship
\nrecycling method has been taken at US$ 25-50\/LDT. As the forecasted figure of ship
\nsupply for recycling is in Gross Ton, it is to be converted into LDT for calculation of
\nfund requirements. First, Gross Ton is to be converted into Dead Weight Ton (DWT) and
\nthen DWT into LDT as per conversion Table 8, as follows:
\nTable 8- Conversion factors
\nTonnage Factor Tanker Bulk Career General Cargo,
\nRo-Ro, Reefer
\nContainer,
\nOthers
\n*DWT (per GT) 1.75 1.70 1.44 1.00
\n**LDT\/DWT factor 0.30 0.33 0.44 0.34
\n*Source: Stopford, 1982
\n** Source: The Ship Recycling Fund, 2005, p. 26
\n58
\nAs LDT\/DWT depends on the type of the ship and its size, its factors should also
\nbe considered (factors shown in Table 8). In the next 3-4 years, the share of tankers\/
\nliquid bulk carriers will be bigger in the total supply for recycling due to the phasing out
\ndrive of single hull liquid bulk carriers. As per the forecasting made above, the
\nrequirements of additional funds for green ship recycling will be as shown in Table 9.
\nTable 9- Requirement of additional fund for green ship recycling
\nYear Million GT\/year Funding requirement in million US$
\nLow(US$25\/LDT) High(US$50\/LDT)
\n2011 23.0 297.850 595.700
\n2012 11.5 148.925 297.850
\n2013 9.5 123.025 246.050
\n2014 10.0 129.500 259.000
\n2015 10.5 135.975 271.950
\n2016 11.0 142.450 284.900
\n2017 11.5 148.925 297.850
\n2018 12.0 155.400 310.800
\n2019 12.5 161.875 323.750
\n2020 13.0 168.350 336.700
\n2021 13.5 174.825 349.650
\n2022 14.0 181.300 362.600
\n2023 14.5 187.775 375.550
\n2024 15.0 194.250 388.500
\n2025 15.5 200.725 401.450
\n2026 16.5 213.675 427.350
\n2027 17.5 226.625 453.250
\n2028 18.0 233.100 466.200
\n2029 18.5 239.575 479.150
\n2030 19.0 246.050 492.100
\nAnnual
\nAverage
\n14.3 185.509 371.018
\nSource: Author
\n59
\nThe requirements of funds shown in Table 9 have been calculated for the
\ninvestment required for green ship recycling in the ship recycling facilities. There will
\nalso be expenditure on arrangement and monitoring of funds, which needs to be
\nconsidered for calculation of the total requirement figure. On the basis of the above
\nassumptions, the average annual additional requirement has been calculated at US$200-
\n400 million to meet the gap between the conventional and standard practices of ship
\nrecycling.
\nAfter arrangement and monitoring of the fund, the next important task is to ensure
\nits utilisation in a proper manner, otherwise the whole exercise would be infructuous. A
\nmechanism is required to be developed for its proper utilisation and accordingly, the
\namount released to the stakeholder concerned (ship owner, shipyard or the state) is
\nrequired to be monitored to ensure its bona fide use.
\n5.4 Financial structure of the Fund
\nThe fund structure for arrangement of \u201eShip Recycling Fund\u201f can have any of the
\nfollowing three options:
\n(i) Endowments: Capital investment can be done by the members of the
\nAssociation made for the Ship Recycling Fund and the income from the
\ninvestment is to be utilised to cover the gap between conventional and
\nstandard practices of ship recycling.
\n(ii) Sinking funds: Under this system, the entire principal and the income from
\ninvestments can be accumulated regularly in a separate account and disbursed
\nover a fixed period.
\n(iii) Revolving funds: Under this system, resources are received on regular basis,
\nsuch as proceeds of special taxes, levies and charges augmenting the original
\ncapital of the fund, providing a continuous source of funds for the purpose.
\nAmong these three options, the first two types of funding require a big capital
\ninvestment; on the other hand, sources for revolving funds do not require big investments
\nbut are managed from the current charges. The \u201epolluter pays principle\u201f suits this system
\n60
\nof funding managed from taxes and charges to be levied (\u201cStudy in relation\u201d, 2009, p. 9).
\nInitial investment in ship recycling yards will be needed to facilitate them in initial
\npreparedness for green recycling. This support funding can be managed through donor
\nHelpance bilaterally or multilaterally or pre-financing by states in the form of loans.
\n5.5 Financial mechanism of the Fund
\nFunds can be raised in the form of contribution from the stakeholders either at the
\nconstruction stage or during the operational life of ships.
\n(i) Contribution at the construction stage of ships
\nThe proposed \u201eShip Recycling Fund\u201f can be raised by making contribution at the
\nconstruction stage of the vessel. For contribution at the construction stage, the system
\nadopted in the Netherlands can be followed. In the Netherlands, on the occasion of the
\npurchase of a car the owner has to pay a fee (i.e. 0.5% of the cost of the car) as disposal
\ncontribution to be utilised by the foundation established to ensure standard dismantling of
\nthe car at the end of its economic life. The foundation has been entrusted to manage the
\nfund, monitor the car recycling industry and subsidise the car recycling industry for
\nremoval of non-recyclable materials along with the research and development work on
\nrecycling methods. The car recycling industry is taking the cars without making any
\npayment to the car owners which has been accepted by the consumers. Further, for
\ndisposal of batteries and electrical appliances, a similar system has been introduced there.
\nThe European Union had also introduced a special scrapping fund to control the inland
\nnavigation sector facing overcapacity. For raising this fund, pre-financing was done by
\nthe member states through advance payment in the form of loans (\u201cThe Ship Recycling
\nFund\u201d, 2005, pp. 26-28). Such system of contribution at the construction stage can be
\nadopted for ships also and a fee structure can be made as per the type and size of the ship.
\nThe ship owners can establish an association or club, which will be assigned the task of
\ncollection and disbursement of the fund for green ship recycling along with the research
\nand development work on the subject.
\nHowever, there are certain demerits in this method: (i) The owners of the new
\nships will have a competitive disadvantage in comparison to owners of existing ships
\n61
\nexempted from the contribution as the former only has to contribute for the Fund; (ii) As
\nthe contribution is to be made by the new ships only, it will be too high due to the number
\nof new ships being much lower than the total number of ships in operation (details of the
\npresent world merchant fleet and ship acquisition forecasted can be seen in Tables 10 &
\n11). Further, this system will be against the \u201epolluter pays\u201f principle as the owners of the
\nexisting ships are creating more pollution than the new ships. Furthermore, the
\naccumulation of the requisite amount under the proposed fund may take a long time due
\nto lower number of contributing ships i.e. only new ships having a long economic life.
\nTable 10- World merchant fleet by country of domicile as of January 1st, 2006-2010
\n(Ships of 1,000 GT and above; in million DWT)
\nCountry Type 2006 2007 2008 2009 2010
\nCountry unknown 50.6 45.7 59.3 67.3 86.6
\nCountry of domicile 885.8 955.4 1011.8 1077.1 1139.1
\nWorld total 936.4 1001.1 1071.1 1144.4 1225.7
\nSource: Shipping Statistics and Market Review, Volume 54 No. 7, 2010, p. 5
\nTable 11- Addition to the world merchant fleet by nation and foreign flag
\ndistribution during 2005 and 2009 (in million DWT)
\nShip type New Building addition to
\nNational flag Foreign flag Total controlled
\n2005 2009 2005 2009 2005 2009
\nTanker 9.7 15.4 22.4 34.7 32.0 50.1
\nBulk Carrier 4.6 7.6 17.8 31.7 22.3 39.3
\nContainer 1.5 1.2 9.5 10.0 11.0 11.2
\nGeneral Cargo 0.7 1.1 1.6 3.3 2.3 4.4
\nPassenger 0.1 0.0 0.1 0.1 0.1 0.1
\nSource: Shipping Statistics and Market Review, Volume 54 No. 7, 2010, p. 6
\n62
\n(ii) Contribution in the form of fee levied during operational life of ships
\nThe second option for financing can be in the form of fee levied during the
\noperational life of the ships. Earning of funds will be made from both the new and old
\nships, which will be an impartial treatment to both age groups of ships. Collection of
\nfunds under this system will definitely be bigger as the number of ships will be greater.
\nUnder this mechanism, collection of fund has been proposed by one of the following
\nmethods:
\n(a) Collection of fee along with P &I insurance premium of the ship: The
\ncontribution for \u201eShip Recycling Fund\u201f can be collected by the insurance
\ncompanies along with the insurance premium. As Protection and Indemnity (P
\n& I) insurance is highly international and obligatory, the contribution attached
\nwith it will have favourable results. There will not be the requirement for a
\nnew set up which will save the administrative expenditure.
\n(b) Levying through the flag states: The flag state providing the authority to fly
\nits flag can ask its ships to deposit the contribution for the fund. After
\ncollecting the contribution, the flag state can transfer it to the fund organisers.
\nIMO can play a great role as a co-ordinator in such arrangement.
\n(c) Introduction of a recycling life insurance: After estimating the recycling
\ncost of a ship, the same can be collected within its operational life in the form
\nof annual life insurance premium. For collection of the recycling premium, the
\nservices of insurance companies can be taken. The pre-cleaning and ship
\nrecycling expenses are to be paid initially by the ship owners. The fund
\naccumulated is to be kept reserved and after submission of the
\nproof\/certificate about green recycling of the ship, expenses on pre-cleaning
\nand recycling of the ship are to be reimbursed to the ship owner. In case of the
\namount collected for scrapping of a ship found higher than the amount
\nclaimed for reimbursement, the balance is to be refunded to the owner.
\nSimilarly, in case of shortage, the limit of reimbursement would be up to the
\nfund accumulated in the form of recycling life insurance premium during the
\noperational life of the ship.
\n63
\nThere are two demerits in the system- (a) there is a possibility of false certificate
\nto be submitted by the ship owners claiming green ship recycling. But it can be controlled
\nby making the condition to have recycling only from the ship recycling facilities certified
\nby the management of the Fund; (b) there is a possibility of different treatment by the
\ninsurance companies with the old and new ships; insurance companies may deny
\nsometimes to insure old ships or if accepted, at very high premium (\u201cThe Ship Recycling
\nFund\u201d, 2005, pp. 30-33).
\n5.6 Disbursement mechanism of Ship Recycling Fund
\nBefore selection of the most feasible option from the systems suggested above for
\ncreation and operation of the \u201eShip Recycling Fund\u201f, the strategy proposed is discussed
\nbelow:
\n(i) Collection of fees: There are three options suggested above for collection of
\nfees- (a) by the insurance companies as fees along with the instalment of Hull
\nand Machinery; (b) the contribution to be collected by the flag states as levy;
\n(c) collection by the insurance companies in the form of premium for
\nrecycling insurance.
\nAs discussed earlier, collection of fees, its monitoring and certification of
\nship recycling facilities, handing over all these responsibilities to the ship
\nowners either by making an association or club like P & I Club, appears to be
\nthe best option under which the fees will be collected either through existing P
\n& I Clubs or a new set up as per their suitability.
\nThe fees to be collected from ships can be decided on the basis of an
\neconomic instrument as per the quantity of hazardous materials recorded in
\nthe \u201eInventory of Hazardous Materials\u201f. The difference in the fee (the higher
\nthe quantity of hazardous materials, the higher the fee) will give the message
\n\u201epollution not free\u201f and will support the individual pollution control principle
\nalso (Ma, 2010, pp. 487-497).
\n(ii) Certification and control: Ship recycling facilities claiming green recycling
\npractices will have to be certified by the management maintaining the Ship
\nRecycling Fund. The ships recycled by any of these certified recycling
\n64
\nfacilities only, will be entertained by the management of the Fund for
\nreimbursement of the expenditure claimed by the ship owner on pre-cleaning
\nand recycling of the ships. These ship recycling facilities should be able to
\nrecycle the ships as per the procedure prescribed under the Hong Kong
\nConvention and the guidelines issued from time to time by other international
\norganizations. There should also be a system for audit of these certified ship
\nrecycling facilities at regular intervals by the independent audit parties
\nselected from the member states of the IMO. For co-operation from the states
\nconcerned, IMO may provide necessary Helpance to the management of the
\nFund.
\n(iii) Disbursement of fund: It would be ideal to give the liberty to the ship
\nowners to choose any of the certified ship recycling facilities. Ship owners
\nwill choose one of the certified ship recycling facilities. After completion of
\nthe pre-cleaning and recycling work in standard manner by making payment
\non their own, the ship owners will submit the green ship recycling certificate
\nto the management for reimbursement of the expenditure done by them. After
\nscrutiny of the claim, the amount can be released from the Fund to the ship
\nowner. The amount reimbursed to the ship owner should be sufficient to meet
\nthe additional fund spent for green recycling of the ship. In case of an amount
\nbeing lower than the requirement, there is possibility of continuation of the
\nparallel recycling market running in the states, not ratifying the Hong Kong
\nConvention. Therefore, the disbursement mechanism is to be finalised taking
\ninto consideration all the aspects so that there is no risk of any parallel
\nrecycling market providing sub-standard facilities.
\n(iv) Research & Development (R & D) on green ship recycling practices: For
\nimprovement in the green ship recycling, research needs to be done
\ncontinuously. The management should arrange the fund for such research
\nwork and monitor its progress along with implementation of the
\nrecommendations made by the research team after examining their feasibility
\nand other practical aspects. Continuous research to sort out the problem in
\n65
\nexisting procedure of ship recycling and further improvement in the existing
\nsystem will be helpful in achieving the goal of safe and environment-friendly
\nrecycling of ships. The management of the \u201eShip Recycling Fund\u201f should
\nmake efforts to have research uninterrupted for efficient and effective ship
\nrecycling facilities to achieve the goal of safe and environment-friendly
\npractices.
\n5.7 Similar system existing for waste management
\nTo have an idea about the feasibility of the system proposed above, an analysis of
\nsimilar systems existing in many countries for green recycling of cars and other wastes
\nhas been done below:
\nSweden: In Sweden the overall responsibility for waste management rests with the
\nMinistry of Environment. In 1967, the Ministry established the Swedish Environment
\nAgency to function as the central enforcement and supervisory agency. The \u201edeposit
\nrefund\u201f system was introduced by the agency in the 1970s under which the producer or
\nimporter of a car pays a \u201erecycling fee\u201f decided by the Government. This fee is deposited
\nin the \u201eVehicle Disposal Fund\u201f which is utilised as an incentive in the form of scrapping
\npremium. This scrapping premium is released to the final car owner after deregistration
\nof the car for green recycling. The final car owner also gets the chance to negotiate with
\nthe dismantler about the negative or positive value of the car in addition to receipt of the
\nscrapping premium. In case of purchase of the car by the dismantler before its
\nderegistration, the scrapping premium is paid to him (\u201cEnd-of-life Vehicles\u201d, 2005;
\n\u201cNational Waste Management\u201d, 2005).
\nThe Netherlands: As already explained in para 5.5 (i) above, a \u201ewaste disposal fee\u201f is
\ncollected from the customer on the occasion of the registration of the car. The financing
\nfor collection of the scrap cars and recycling activities, is done from this fund
\naccumulated as \u201ewaste disposal fee\u201f. Auto Recycling Netherland (ARN), established by
\nthe Dutch Automobile industry, is responsible for collection of the scrap cars from the
\n66
\nlast owner. The scrap car is taken from the owner without making any payment and its
\ngreen recycling\/dismantling is done by the ARN under the contract signed with car
\ndismantling companies (\u201cRecycling and Reuse\u201d, 2008; \u201cEnd-of-life Vehicles\u201d, 2005).
\nJapan: In Japan the consumers pay a fee for dismantling on the occasion of purchase of a
\nnew car. The fee collected is managed by a third party, the \u201eJapan Automobile Recycling
\nPromotion Centre (JARC). To properly ensure the recycling of end-of-life vehicles
\n(ELVs), an electronic manifest system is used (Recycling and Reuse, 2008).
\nSimilarly, the customers have to pay an extra charge for green dismantling of
\nother household items e.g. US$35 for a washing machine, US$40 for a television, US$50
\nfor an air conditioner and US$60 for a refrigerator as recycling fee including the
\ntransportation cost to the site of recycling (\u201cRecycling and Environmental\u201d, 2011).
\nSwitzerland: Switzerland ranking among the top countries in the world regarding
\nenvironmental protection, stresses on the \u201epolluter pays principle\u201f about waste
\nmanagement. It is the first country in the world establishing a formal system to manage ewaste. Electronic goods have been divided into two groups, namely brown goods and
\nwhite goods allocating the task of collection and recycling to the two organisationsSWICO and SENS. The financing for these activities has been arranged through the
\nAdvance Recycling Fee (ARF) charged on all new appliances. This fund is utilised for
\nthe expenditure on collection, transportation and recycling of the disposed appliances
\ncollected free of cost from the owners through the collection centres of SWICO and
\nSENS around the country. To ensure quality maintenance and environmental standards,
\nthere are multiple levels of independent controls supported by the national laws
\n(Khetriwal, Kraeuchi & Schwaninger, 2005).
\nThe USA: In the USA a coalition of federal, State, industry and environmental non-profit
\npartners, created in 2006 a \u201eNational Vehicle Mercury Switch Recovery Program
\n(NVMSRP)\u201f as a voluntary effort to promote safe removal of mercury switches from endof-life vehicles before their recycling. A voluntary US$4 million fund has been
\n67
\nestablished by the steel and auto manufacturers to provide incentives for switches
\nreturned through the NVMSRP (\u201cRecycling and Reuse\u201d, 2008).
\n5.8 Summary
\nAs appears from the above examples of waste management systems adopted by
\nmany countries, the market-based incentive scheme is functioning as a motivation factor
\nfor its success. The \u201cSeven R\u201fs principle15\u201d of Wal-Mart also supports the market-based
\nstrategy. As per this principle, \u201cWhen Wal-Mart tells a supplier that it wants a change in
\npackaging, that supplier changes all its packaging\u201d. The principle demonstrates vividly
\nthat a customer can exert considerable pressure on its supplier to accept the demand
\nplaced by the customer (Lai, Lun, Wong & Cheng, 2010). In the ship recycling market,
\nthe customer is the ship owner; if the ship owners will demand green ship recycling, the
\nyards will have no option but to opt for the same.
\nEstablishing a Ship Recycling Fund to be utilised as an incentive scheme, can
\nfunction as a market oriented mechanism, motivating the ship owners to demand green
\nmethod for recycling of their ships which can not be denied by the yards to get the
\nbusiness. To have such arrangement for green ship recycling, a proper mechanism needs
\nto be developed under which all the provisions for management of the \u201eShip Recycling
\nFund\u201f are to be finalised. But all these developments need support of the
\nRegulations\/Convention in this regard. IMO being the nodal agency, should take
\ninitiatives in this regard as it will Help in achieving the target fixed under the Hong Kong
\nConvention, 2009. Through the tacit acceptance procedure16, IMO can make such
\nprovisions in the Hong Kong Convention.<\/p>\n
15 The \u201cSeven R\u201fs principle\u201d of Wal-Mart refers to remove, reduce, reuse, renew, recycle, revenue and
\nread.
\n16 The ‘tacit’ or ‘passive’ acceptance procedure means that the body which adopts the amendment at the
\nsame time fixes a time period within which contracting parties will have the opportunity to notify either
\ntheir acceptance or their rejection of the amendment, or to remain silent on the subject. In case of silence,
\nthe amendment is considered to have been accepted by the party…”.
\n68
\nCHAPTER- 6
\nDiscussion and Conclusions
\n6.1 Maritime industry and ship recycling
\nAfter globalisation of the world trade, the shipping sector played the key role in
\ntransportation of goods from one corner of the world to another. The increase in the
\nworld tonnage offered ship owners a chance to increase their fleets. As the demand in the
\nworld trade is not always increasing but constantly fluctuating, it affects the world
\nmerchant fleet. In case of increase in the demand, the fleet size increases; similarly, in
\ncase of decline in the demand, the fleet size has to decrease accordingly. Apart from
\ncancellation of the ship acquisition orders, ship owners have two immediate options
\navailable to downsize their fleets: either lay up their old ships or sell them for recycling.
\nAs laying-up of ships is a temporary and expensive arrangement preferable for a shorter
\nperiod, ship owners opt to sell their old ships for recycling. Otherwise also, after
\ntechnological changes or on completion of the economic life, the ships are required to go
\nfor recycling. As ship recycling is the most sustainable and eco-friendly way of disposing
\nof old vessels, it is beneficial to all offering the use or recycling of every part of a ship\u201fs
\nhull and machinery.
\nIn the first decade of the 21st century, the shipping industry enjoyed the boom for
\n4-5 years, but in the second-half of 2008 it felt a drastic decline in demand compelling
\nship owners to downsize their fleets. This decline in the world trade offered the ship
\nrecycling industry a good number of vessels for scrapping. Simultaneously, the
\namendments in IMO\u201fs Convention, MARPOL 73\/78 also enriched the ship recycling
\nindustry, especially by single hull tankers. The period of 2009-2011 came as the golden
\nperiod for this industry after sufferings during the period of 2004-2008, considered as the
\ngolden period for the freight market. In the years 2012 and 2013, the supply of ships for
\nrecycling is expected to decline but it will grow steadily thereafter, as per the forecasting
\nof the World Bank (World Bank Report, 2010, p. 34).
\n69
\nThe ship recycling industry which has a tendency to shift from one place to
\nanother, is presently running in South Asian countries (Bangladesh, India and Pakistan),
\nChina and Turkey. Due to cheaper manpower and liberal regulations on safety, health and
\nthe environment, ship recycling is cheaper in these states. The principle of ship recycling
\nbeing a sound one, the method adopted by these states provides no room for safety of
\nhuman-life and the environment. Ship recycling yards are lacking the infrastructural
\nfacilities and knowhow about handling and disposal of hazardous materials\/toxic wastes.
\nBut they are not ready to invest in the business which is volatile in nature having a
\ntendency to shift due to any of the reasons like strict compliance of the regulations,
\ncheaper manpower, scrap steel demand or any other political reasons. If ship recycling is
\ndone by the standard procedures, it becomes expensive and the ship recycling yards
\nfacing tough competition in the market, have the risk of losing the business in case of
\nfollowing the standard procedures of recycling.
\n6.2 Ship recycling: a commercial activity
\nShip recycling is a commercial activity; therefore, any solution to the problem
\nfaced by the industry is required to suit the market. If the market demands investment in
\ninfrastructure and training facilities for the workers, the industry will take the necessary
\nsteps automatically for such facilities just to avoid the risk of losing customers. For
\nsurvival in the market, ship recycling yards will have to develop the facilities demanded
\nby the market otherwise they will lose the customer. It can therefore, be said that the
\nsolution to the problem of substandard practices in the ship recycling industry demands a
\ncommercially viable mechanism, able to compel the stakeholders to opt for the standard
\npractices for recycling of ships.
\nTo achieve the goal of safe, sound and environment friendly recycling of ships,
\nthe Hong Kong Convention was adopted by the IMO on 11th May, 2009. The Convention
\nreflecting the responsibility of the ship owners just from the construction stage of ships to
\nits demolition, has been appreciated by the world. However, enforcement of the
\nConvention may take some time as one of its three conditions (Article-17) is related to its
\nratification by main ship recycling states. Pattaya Workshop organised by the IMO in
\n70
\nMay, 2010 is an effort towards early ratification of the Convention by these ship
\nrecycling states. However, critics have raised doubt about the success of the Convention.
\nAs per critics, even after the entry into force of the Convention, there is a
\npossibility of two distinct ship recycling markets running parallel. Presently there is no
\nincentive for green ship recycling. Ship owners are selling their ships to the yards
\noffering the best price. As explained in Chapter 5, cost is the main barrier in green ship
\nrecycling and to achieve the goal of green ship recycling, co-operation from ship owners
\nis the crucial factor so that the yards doing sub-standard practices can be discouraged. In
\nsuch a situation, the market will compel those yards to develop the facilities demanded;
\notherwise the yards will have no option but to close down. The arrangement of a Ship
\nRecycling Fund proposed by the author to meet the additional expenditure for green
\nrecycling, is expected to function as a commercially viable solution motivating ship
\nowners to opt for green recycling of their ships. Consequently, the ship recycling
\nfacilities will get motivation from the demand of the market (demand-supply principle of
\neconomics) for green ship recycling. All these market-based consequences will lead to
\nthe ultimate goal of green ship recycling targeted under the Hong Kong Convention,
\n2009. The only thing that is to be taken care of, is the arrangement of the \u201eShip Recycling
\nFund\u201f, its monitoring and disbursement mechanism, which should be transparent and
\nacceptable to all the stakeholders.
\nAs discussed in Chapter 5, assigning the responsibility to the ship owners for
\narrangement and control of the \u201eShip Recycling Fund\u201f along with its disbursement
\nmechanism appears to be the best feasible mechanism to achieve the goal of green ship
\nrecycling. Ship owners can make an association like P & I Club or assign the
\nresponsibility to the existing P & I Clubs. According to the author, for a permanent
\nsolution to the ship recycling industry shifting from one place to another, the IMO can
\ntake initiatives to have a market based solution to the problem and if required, necessary
\nprovision(s) in the Hong Kong Convention, 2009 may be made in line with the system
\nproposed above.
\n71
\n6.3 Conclusions
\nThe findings of the research derived from the discussion made in the chapters of the
\ndissertation on the issues involved in ship recycling are as follows:
\n\uf0b7 The ship recycling industry has the tendency to shift to the place having cheaper
\nman-power, liberal regulations on safety of human-life and the environment along
\nwith a good market for scrap steel\/reusable items received from ships.
\n\uf0b7 As the standard procedures of recycling are expensive, existing ship recycling
\nyards facing tough competition, are following sub-standard procedures i.e.
\ninsufficient infrastructural and improper waste disposal facilities, workers without
\nproper training and lacking knowledge about handling of hazardous materials.
\nUnder the standard procedures, ship recycling is done with adequate
\ninfrastructural facilities, by the trained workers with appropriate equipment along
\nwith the proper waste management facilities.
\n\uf0b7 Cost is the main barrier in achieving the goal of green ship recycling. With the
\nintention to get the best price, ship owners sell their ships without any
\nconsideration about the recycling method to be adopted by the ship recycling
\nyards. The yards running the business with small margin and without any long
\nterm strategy, opt for the sub-standard practices of recycling to maximise their
\nearnings from the business.
\n\uf0b7 The Hong Kong Convention, 2009 explains the responsibility of the ship owners
\nfrom the construction stage of ships to its demolition. Handling of hazardous
\nmaterials from construction to the demolition stage of ships along with the
\ncondition to carry the inventory, has also been explained in detail. The
\nresponsibilities of all the stakeholders have been mentioned as well as the
\nprocedure to be followed by them for safe and green ship recycling. However, not
\nonly the support of the regulations but also a market oriented strategy needs to be
\ndeveloped to motivate the stakeholders for green ship recycling.
\n\uf0b7 As cost difference in the conventional and standard procedures of ship recycling
\nis the main barrier, a market-based incentive scheme acceptable to all the
\n72
\nstakeholders, is required to be introduced together with the supporting
\nConvention\/regulations.
\n\uf0b7 The Ship Recycling Fund proposed to be arranged to meet the additional cost for
\ngreen ship recycling, is expected to function as a commercially viable solution
\nmotivating the ship owners and recycling facilities to go for green recycling.
\n\uf0b7 All the states having maritime activities should come forward and co-operate with
\nthe IMO in achieving the safe and environment friendly sound recycling of ships
\ntargeted under the Hong Kong Convention, 2009.
\n*********
\n73
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\nAPPENDICES
\nAppendix A
\nResolution 5 on the Early Implementation of the Technical Standards of the Hong
\nKong Convention, 2009
\n\u2026.
\nRECOGNIZING the benefits to be derived from the early application of the technical
\nstandards contained in the Annex to the Convention and in the associated guidelines in
\nrespect of the environment and the occupational health and safety aspects associated with
\nship recycling,
\n1.INVITES Member States of the Organization to consider applying the technical
\nstandards contained in the Annex to the Convention on a voluntary basis to ships entitled
\nto fly their flag, as soon as operationally feasible;
\n2.INVITES ALSO Member States of the Organization to consider applying the technical
\nstandards contained in the Annex to the Convention on a voluntary basis to ship recycling
\nfacilities under their jurisdiction, as soon as operationally feasible;
\n4. INVITES the industry to co-operate with Member States of the Organization in
\napplying the technical standards contained in the Annex to the Convention to ships and
\nship recycling facilities, as appropriate.
\n79
\nAppendix B
\n80
\nAppendix C
\n81
\nAppendix D
\n82
\nAppendix E
\n83
\nAppendix F
\nYear-wise Number of Fatal Accidents in Alang, Gujarat (India)
\n84
\nAppendix G
\nShip Recycling Site, Alang Visit Report
\nThe author is a student of World Maritime University (WMU) doing the postgraduation course in Maritime Affairs (specialisation in Port Management). World
\nMaritime University is an organisation running by and for the international maritime
\ncommunity, operating under the auspices of the International Maritime Organisation, a
\nspecialised agency of the United Nations. Being a part of WMU family, to Help the
\nmaritime sector in achieving the goal of green ship recycling, the author chose to write a
\ndissertation, analysing the creation of a global ship recycling fund in the frame-work of
\nthe Hong Kong International Convention for safe and environmentally sound recycling of
\nships, 2009.
\nThe author visited Alang, India (19-21 September, 2011) to have first-hand
\nknowledge of the ship recycling activities running there. Alang is a coastal town of
\nGujarat state located in the Gulf of Khambat, 50 kilometres southeast of Bhavnagar. Ship
\nrecycling yards in Alang-Sosiya have the advantage of the location with the highest tidal
\nlevel (10 meters) in the country and the best continental self available for ship breaking in
\nAsia. The high tide facility makes it possible to accommodate VLCC, bigger Ro-Ros and
\ncontainer ships to be beached during the high tide and scrapped as the tide recedes.
\nVisit of GMB office
\nThe visit to Alang could be organised with the co-operation of Capt. S. C. Mathur,
\nChief Nautical Officer, Gujarat Maritime Board (GMB), State Govt. of Gujarat on the
\nrequest of the Ministry of Shipping, Govt. of India. The visit started on 19th September,
\n2011 from the O\/o the Gujarat Maritime Board, Alang with a small briefing by officials
\nof GMB about the ship recycling activities and the monitoring role of GMB. Capt. S.
\nChadha, Port Officer, GMB who is in charge of the PMB office at Alang provided the
\ninformation about the number of ships (year-wise) recycled during the period 1982-83 to
\n2011-2012 (up to August, 2011) which may be seen in Appendix D.
\n85
\nVisit to ship recycling yards
\nAfter the visit to the GMB office, the author visited Plot No.-V-1, Priya Blue
\nIndustries Pvt. Ltd. owned by the ship breaker, Mr. Sanjay Mehta. This yard has the
\nrecord of dismantling the largest super-tanker of the world, \u201eKnock Nevis\u201f, owned by a
\nNorwegian Company, \u201eFred Olsen Production\u201f. In the yard the author saw the state of art
\ntechnique of removal of asbestos containing materials from ships and the removal of
\nbigger parts of the ships beached to the area of the yard having permanent shaded
\ndedicated platform for cutting them into smaller pieces. To cut the ship, the yards have a
\nship cutting engineer (called \u201eMukdam\u201f in local language) who decides the cutting plan
\nof the ship as per its structure, size and type. Here the workers were wearing long boots
\nand hand gloves but some were not wearing gloves all the time perhaps due to lack of
\nknowledge about its impact on their health and safety. The author suggested to the
\nmanager of the yard that a small fine to the workers found working without gloves be
\nimposed so that it becomes their habit to always wear gloves.
\nThe author visited Plot No.-2, Leela Ship Recycling Pvt. Ltd. also. This yard was
\nequipped properly having an asbestos handling unit, incinerator, medical and training
\nfacilities for the workers inside. The yard was functioning with safe and environment
\nfriendly facilities for green ship recycling.
\nVisit to the Safety Training Institute
\nFurther, the author visited the training institute at Alang, which is responsible for
\norganising the training programme for workers on safety and waste management of ship
\nrecycling. The training programmes are normally for 2-3 days duration covering different
\naspects of ship recycling. Apart from the training programme, socio-economic activities
\nare also arranged by the institute involving the workers\u201f families to make them able to
\nearn something from arts and craft. Therefore, the institute has the name, \u201eTraining and
\nWelfare Complex, Alang\u201f. The institute management discussed the problem in achieving
\nthe goal of 100% workers trained due to migrated labour force. As per them, in ship
\nrecycling activities the labour-force involved is the labour migrated from other parts of
\n86
\nthe country and from time to time they escape to their native places. Discontinuation of
\nthe labour in ship recycling work makes the training programme run by the government
\ninfructuous. The author advised the management to arrange workshops sometimes for
\nyard owners and their management staff to have discussion towards exploring the
\nsolution of such problems. The institute provided the details about the workers trained
\nsince its inception i.e. 2003 to August, 2011, which can be seen in Appendix E.
\nFurthermore, the institute provided the information about year-wise numbers of fatal
\naccidents during the period 1996-97 to 2011-2012 (up to June, 2011), which can be seen
\nin Appendix F.
\nVisit to the Waste Management Site
\nFinally, the author visited the site of waste management where he saw the land fill
\nsites for disposal of asbestos and other hazardous materials. The dedicated land fill
\nfacility for disposal of the wastes generated by ship recycling can be called a good
\ninitiative of GMB.
\nThe next day i.e. 20th September, 2011 the author visited the Ship Recycling
\nIndustries Association (India), Bhavnagar and met with the President of the Association
\n(Mr. Vishnu Kumar Gupta) and Mr. Nitin Kanakya, having a long discussion on different
\nissues of ship recycling. After that the author visited the O\/o the Regional Officer,
\nGujarat Pollution Control Board, Bhavnagar, Mr. Shah and discussed with him about the
\nwaste management of ship recycling done by GMB. He explained about the arrangements
\nalready made by GMB and its future plan to make Alang ship recycling area like Bharuch
\n(Gujarat), where the green belt has been developed by the State Govt. on the waste
\ndisposal site.
\nOn the last day of the tour the author visited the Head Quarters of GMB at Gandhi
\nNagar (the capital of Gujarat state). There he met with the Senior Environmental
\nEngineer, GMB (Mr. Atul Sharma) and discussed about the waste management work
\ndone by GMB for all types of industrial wastes including ship recycling. He explained the
\nchanges that had happened after the Supreme Court of India order dt. 06\/09\/2007 in a
\n87
\nhazardous waste (Blue Lady Ship breaking) case, asking the government to do what was
\nneeded to ensure safety and waste management.
\nBefore the visit to Alang, the author visited the Ministry of Steel, Government of
\nIndia, Delhi on 16\/09\/2011. As ship recycling provides good enough scrap steel for
\nrecycling, it is the subject matter coming under this Ministry; the author discussed ship
\nrecycling with officer of the Ministry (Mr. C. A. Jhoseph, Under Secretary) concerned. A
\ncopy of the unpublished report of World Bank on ship recycling in South Asia, submitted
\nto the Government of India for its consent before publishing, has also been provided by
\nthe officer. This report contained quite useful and the latest information on ship recycling
\nin South Asia (Bangladesh, India and Pakistan). The author utilised the report in the
\ndissertation to show the ship recycling forecasted for the period 2010-2030.
\nThe present visit to Alang, India for first hand information on ship recycling was
\nvery useful and valuable especially for the research work on the subject.
\nGopal Krishna Choudhary
\nPort Management (s 11009)
\nWorld Maritime University
\nMalmo, Sweden<\/p>\n","protected":false},"excerpt":{"rendered":"
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