Brace for Impact: The E.U. Ship Recycling Regulation


Brace for Impact: The E.U. Ship Recycling Regulation

Credit: PHP
Credit: PHP in Bangladesh

By Michail Matthaiakis 2018-07-28

In five months from today, the European Union will be implementing regulations mandating that all the end-of-life EU-flagged vessels will have to be recycled in facilities that are included in the European list of approved ship recycling facilities. While at present about 95 percent of the global recycling takes place in five countries, all outside Europe, on the other hand the European list of approved yards currently only contains yards that are located in the European Union.

While the shipping community is focused on the IMO 2020 sulfur cap and the Ballast Water Management Convention, which are of course important issues, the E.U. ship recycling regulations that are ready to be applied are equally important and will have massive implications for the shipping industry’s future for a number of reasons:

Capacity: There is not enough capacity in Europe to recycle all the E.U.-flagged ships. Even the European Community Shipowners’ Associations (ECSA) reported in a public statement: “The current edition of the E.U. list of approved ship recycling facilities only features yards situated in Europe and has a capacity of around 300,000 light displacement tonnes (LDT). For ECSA, this demonstrates clearly that only when third country ship recycling yards will get E.U. recognition and added to the list, there will be sufficient capacity.”

We also need to understand that there is a discrepancy between the actual recycling capacity and the theoretical capacity and that some of the European yards that are included in the capacity figure have not been recycling vessels.

Catastrophic drop in Asset Values: If all the E.U.-flagged vessels are forced to be recycled within the European Union, then the owners will not only struggle to find capacity but also the asset values are expected to depreciate by up to 75 percent. For example, a VLCC with a residual value of $16 million in India today may be worth less than $4 million in an E.U. yard. In addition, we must not forget that till today a VLCC has never been recycled in an E.U.-based yard.

Perception: In an effort to spread fake news, some specific groups claim that there are no other recycling yard options outside the E.U., where ships can be recycled in a safe and responsible manner. This is simply not true.

E.U. versus the Hong Kong Convention: The implementation of the regulation that the European Commission appears to be heading, whereby it is not supporting the development/improvements that are taking place in the major recycling centers of the world, is undermining the role of the Hong Kong Convention and destabilizing the industry as a whole with significant repercussions that the European Commission either ignores or disregards.

Quality: The majority of yards in India have been significantly upgraded to meet the standards of the Hong Kong Convention. These yards have been vetted and approved by IACS-members like ClassNK, RINA and IRS. Several E.U. owners have successfully recycled their vessels at these facilities and vouch for their quality standards.

Urgency and Relevance: This is the last window of opportunity to deliberate this issue before the E.U. regulation is implemented.

As we are now approaching the date of the regulation’s implementation, we must alert both the European Commission and the shipping community to “brace for impact” as undoubtedly there will be a massive disruption in the shipping industry that could potentially lead to significant repercussions, unless Hong Kong Convention compliant yards in traditional ship recycling countries are approved by the European Commission and included in the European list of approved yards.

Michail Matthaiakis is a Trader in the SnP department at GMS.

Leave a Reply

SSCP   CAS-002   9L0-066   350-050   642-999   220-801   74-678   642-732   400-051   ICGB   c2010-652   70-413   101-400   220-902   350-080   210-260   70-246   1Z0-144   3002   AWS-SYSOPS   70-347   PEGACPBA71V1   220-901   70-534   LX0-104   070-461   HP0-S42   1Z0-061   000-105   70-486   70-177   N10-006   500-260   640-692   70-980   CISM   VCP550   70-532   200-101   000-080   PR000041   2V0-621   70-411   352-001   70-480   70-461   ICBB   000-089   70-410   350-029   1Z0-060   2V0-620   210-065   70-463   70-483   CRISC   MB6-703   1z0-808   220-802   ITILFND   1Z0-804   LX0-103   MB2-704   210-060   101   200-310   640-911   200-120   EX300   300-209   1Z0-803   350-001   400-201   9L0-012   70-488   JN0-102   640-916   70-270   100-101   MB5-705   JK0-022   350-060   300-320   1z0-434   350-018   400-101   350-030   000-106   ADM-201   300-135   300-208   EX200   PMP   NSE4   1Z0-051   c2010-657   C_TFIN52_66   300-115   70-417   9A0-385   70-243   300-075   70-487   NS0-157   MB2-707   70-533   CAP   OG0-093   M70-101   300-070   102-400   JN0-360   SY0-401   000-017   300-206   CCA-500   70-412   2V0-621D   70-178   810-403   70-462   OG0-091   1V0-601   200-355   000-104   700-501   70-346   CISSP   300-101   1Y0-201   200-125  , 200-125  , 100-105  , 100-105  , CISM   NS0-157   350-018  , NS0-157   ICBB  , N10-006 test  , 350-050   70-534   70-178   220-802   102-400   000-106   70-411  , 400-101   100-101  , NS0-157   1Z0-803   200-125  , 210-060   400-201   350-050   C_TFIN52_66  , JN0-102  , 200-355   JN0-360   70-411   350-018  , 70-412   350-030   640-916   000-105   100-105  , 70-270  , 70-462   300-070  , 300-070   642-999   101-400   PR000041   200-101  , 350-030   300-070  , 70-270  , 400-051   200-120   70-178   9L0-012   70-487   LX0-103   100-105  ,