How the future looks for ballast water treatment system suppliers
When the IMO convention was adopted in 2004, it was not a sudden event as the discussions around it had been in progress for several years. In that time system makers were developing their products in expectation of a huge retrofit market.
In addition, the newbuildings market was climbing towards a peak that would continue even after the crash of 2008. But from a high of nearly 6,000 newbuildings being delivered annually in 2010/2011, the drop from 2013 onwards back to the more usual levels of the past and even as low as less than 2,000 vessels per year has left system makers in an uncomfortable position.
The constant delays in the ratification of the convention had already caused many of the early entrants to draw back from further investment and there were also some casualties along the way. For others, staying in the race to recover at least some of the R&D and approval testing outlay has been a driving factor. The refusal of the US authorities to accept the results of type-approval testing under the IMO rules has meant that all system makers intending to sell to ships trading internationally have had to pay out twice for approvals. Furthermore, the IMO decisions to toughen up the type-approval procedure and extend the deadline for existing ships has caused many owners to question the wisdom of installing the systems approved to the older standards.
Currently there are around 90 different systems either in production or in the testing process. While there are tens of thousands of ships that will require be retrofitted with a ballast treatment system this programme will be completed at some point in 2024. Beyond that date only newbuildings will be required to be fitted with systems.
Under the present circumstances of overcapacity and sluggish trade growth, it is difficult to predict what the level of newbuilding will be after that date or in the run up to it. Quite clearly many owners will be happy to take advantage of the allowed extension and will use it to avoid fitting systems to ships in the final years of their working life, so a large proportion of the retrofit market has been lost.
Another slice of the retrofit market could be lost to SRA exemptions. Around the globe a large percentage of seaborne trade is conducted in areas where species transfer occurs under natural conditions and ships’ ballast is therefore not a vector for invasive species. Such exemptions would require co-operation between states and the cost of carrying out the work may be an excuse for some states to decide against. However, one assessment has been carried out in the Baltic Sea as a pilot project aimed at establishing best practices for co-operation. Another is being carried out in South East Asia involving Indonesia, Malaysia, Singapore, Thailand and Vietnam.
There has been no indication of exactly when the first SRA will be declared or if other countries are considering following the lead taken by the first pioneers, but many short-sea owners are banking on them in the medium term. An occasional voyage outside of an SRA could be allowed for by use of a port-based treatment system.
Few expect a return to the newbuild levels of the first decade of the century and suggestions are that a very good year would see between 2,000 and 3,000 ships joining the fleets. That in itself would be too low a level to keep all system makers in business. And since it would also include a large number of vessel types such as tugs, workboats and domestic ferries that do not have ballast systems and a similar number that might be destined for trading only in SRAs or to ports with shore-based facilities, then the remainder that do require a treatment system to be installed could account for just a thousand or so.
Quite clearly this level of work would not be sufficient to ensure the survival of all those manufacturers that are currently positioning themselves for the retrofit market. There will therefore likely be many failures, mergers and consolidation that will need to take place once the initial rush is over. Even the system makers themselves accept this reality and most believe that the final market will shrink to just 10-15 active suppliers.
This could represent a major problem for the owners of new ships now being delivered, particularly if those systems chosen have a relatively high degree of sophistication. In such cases maintenance spare parts and service assistance will not be guaranteed necessitating the use of alternatives.
It could well be that in some cases where non-OEM spares are used the type approval and therefore the legitimacy of the system could be compromised.
The financial collapse in 2017 of the OceanSaver system which at the time was one of just five with USCG type-approval shows how precarious the market is. The US type-approval alone should have ensured a reasonable level of sales but other factors relating to development and sales were clearly overwhelming.
In the event, the OceanSaver system was acquired by a fellow Norwegian marine equipment supplier IMS Group and remains available and supported. Following this development, the USCG took the unusual step of explaining what happens if a manufacturer of US type-approved equipment goes out of business?
Apparently, all equipment manufactured during the validity of the type approval certificate remains “Approved” as long as it is manufactured, installed, and operated according to the terms of the type approval certificate. Any maintenance and repairs to this equipment must also be performed in accordance with the manuals and components specified as part of the type approval. If the equipment fails to operate and parts from the original equipment manufacturer are no longer available, then the equipment is no longer operating under its type approval and must be replaced.
USCG Type approval certificates are issued for five years. After five years, only the manufacturer listed on the certificate can request renewal although it is possible as in the OceanSaver case for a company acquiring the named manufacturer to apply for a change in certification. After a period of five years, if not renewed, the certificate will be placed in an “Expired” status. At this point, the product is no longer approved for production, but items manufactured prior to the expiration of the approval remain “Approved” as described above.
Ensuring that any system fitted to a ship planning to trade in US waters for a reasonable number of years will mean that the operator must ensure that OEM spare parts necessary for type approval will continue to be available for the lifetime of the equipment. That suggests that shipowners need to make their choices based on the survivability of the OEM when only newbuilding installations are available. That may not be an easy task, but it should help manufacturers who can demonstrate a fair degree of staying power.