Hopes rise for recycling convention, but a future scrap may result

The Hong Kong Convention on ship recycling is not on the scrapheap. Far from it: the nations that must ratify it if it is to have any chance of coming into force say they are working towards that goal. But above them hangs a potential wrecking ball and alongside them sits the EU, which has its own recycling regulation that some see as a threat to the convention.

This was all aired during a well-attended international seminar on ship recycling, held on Friday (10 May) at IMO’s headquarters. It had the title ‘Towards the early entry into force of the Hong Kong Convention’. The word ‘early’ might seem ironic, since this month mark’s the 10th anniversary of the convention’s adoption on 15 May 2009, so I assume it was used to mean ‘as soon as possible’.

That anniversary seems to be a coincidence: the proximity of MEPC 74, taking place this week (13-17 May) is the more likely driver for the seminar’s timing.

When I signed up to attend I thought the convention’s imminent entry into force was a fanciful notion but speakers from India, China and Bangladesh – all leading ship recycling nations – told us that they are working towards ratifying the convention. In Bangladesh’s case, a timetable has already been laid down, thanks to its Ship Recycling Act of 2018, which includes a five-year timetable towards ratification in 2023.

India, the world’s leading ship recycling nation with more than 30% of the global market, has a Ship Breaking Code, which was revised in 2013 and incorporates all the requirements of the Hong Kong Convention, but unlike the convention, it applies to all ship types, we were told.

Its government has decided in principle to ratify the convention, having sought the views of coastal states where ship recycling facilities are located, the director of its Ministry of Shipping, Dashrath Prasad said. In fact, the legislation would have been introduced to parliament by now “but it was instructed” – he did not say by whom – “that [we] have to consult all the coastal states”.

That was done on 9 April, which has resulted in some changes being made to the bill, but the process has now been delayed by the country’s lengthy general elections; they began on 11 April and the results are due on 23 May. He now hopes to introduce the bill in the next parliament but did not say when ratification would happen.

China remains bullish

Then there’s China. It has extensive ship recycling facilities but since 1 January this year it has banned imports of ships for recycling as part of its wider ban on importing waste products, which it introduced in August 2017. Chunchang Zhang, deputy director of the China Maritime Safety Administration, told the seminar that the policy is to help “build a beautiful China” but acknowledged that it will have a big impact on its ship recyclers. Some will struggle to survive, he said.

Nonetheless, the country is preparing to ratify the Hong Kong Convention. It is “one of the most beautiful IMO conventions” he said, but explained that some laws will need to be modified first. “It will take a long time; it’s not easy to do that,” he warned.

During discussion, he was asked whether China might ever reopen its doors to ships for recycling, but he did not give a clear answer (at least, not clear to me). He said instead that there was no link between the ban and ratifying the convention, pointing out that some states that had ratified it have no recycling facilities, which has the same effect, he seemed to be suggesting, as China’s position with its ban in place, “so I don’t think that is a big problem in the future,” he said.

I should add a note here for any reader who is not familiar with the convention to explain why states such as India, Bangladesh and China feature so prominently in this discussion. It is because the convention will come into force once it reaches 15 representing 40% of the world’s tonnage but, crucially, those states have to have ship recycling facilities whose “combined maximum annual ship recycling volume during the preceding 10 years is at least 3% of the gross tonnage of the contracting states.”

That is the sticking point: in practice, it means that India and one other major recycling nation must be on board to bring it into force. That could be China, despite its recent ban: because of the ‘preceding 10-years’ factor in the calculation, its historic data would be sufficient to reach the threshold.

Conflicting advice

In some opening remarks at the start of the seminar, IMO secretary-general Kitack Lim set out the current situation: the 11 states that have ratified represent 23% of the world fleet but only 0.56% in terms of their recycling capacity – and that figure is mostly because Turkey – the world’s fifth largest ship recycling nation – has ratified the convention. Mr Lim concluded by urging member states to ratify it to bring it into force as soon as possible.

Ironically, that is not good advice. Guy Platten, secretary-general of the International Chamber of Shipping (ICS) – who, along with all the other shipowner representatives who spoke (ECSA, ASA and Intertanko), wants the convention to come into force – pointed out in his presentation that “perversely, the requirements require larger flag states … not to ratify the convention. … The big flag states could kill the convention with kindness.”

That is the wrecking ball I mentioned at the start of this commentary. If those large flag states do not wish the convention to come into force, they might be motivated by emotions other than kindness to swing their vast tonnages into action.

It is clear, then, that it is important to know what those large flag states’ intentions are towards the convention and I asked during discussion if there were any representatives of flag states such as the Marshall Islands and Liberia in the room who could clarify their stance. No one took up the offer, so I presume they were not represented at the event. I have since contacted representatives of both those states to ask them what their views are and will update this item in due course.

However, I did speak later to Dr Nikos Mikelis, an independent consultant and a non-executive director at GMS, the world’s largest buyer of ships for recycling. He has long been a go-to expert on ship recycling and presented a paper last Thursday (9 May) to an industry working group on ship recycling, hosted by the ICS. He told that meeting that Liberia and the Marshall Islands are “ready and willing to accede to the Hong Kong Convention” but have not done so because that could stand in the way of the recycling capacity reaching its 3% minimum. So he clearly believes that they do have the convention’s best interests at heart.

Europe’s unique standards

Dr Mikelis is more concerned about the European Regulation on Ship Recycling (known as the EU SSR), which came into effect at the start of this year. It incorporates all the requirements of the Hong Kong Convention but sets higher standards when assessing whether a recycling facility can be included on its list of approved yards that European-flagged ships must use. At the moment, that list consists of 26 EU yards plus two in Turkey and one in the US. It has none in India and Bangladesh – even though both countries have yards that meet the convention’s requirements - or China.

In a presentation to Friday’s meeting, Peter Koller, policy officer at the European Commission’s Directorate General for the Environment, justified this by saying that the convention allowed states to set “more stringent requirements”. But Dr Mikelis thinks that the EU’s interpretation is not what was intended: That was meant to be used for a state to rule on standards for its yards or ships, “it is not meant to impose requirements elsewhere,” he told me. Instead, the EU is “creating a hyper-standard,” he said.

For most of the discussion period, delegates challenged Mr Koller on that point, but he defended the European position, saying that there was no global standard when the commission started work on its own regulation and that its regulation had encouraged improvements in ship recycling practices and was therefore acting as a catalyst to bring the convention into force.

The obvious question to ask him was whether the European regulation would be repealed once the Hong Kong Convention comes into force and provides the global standard that he said was what Europe wanted. He had to leave quickly to catch the last Eurostar of the day, so I contacted him immediately after the event by email.

In reply, he confirmed that the EU’s standard will mean that not every yard that complies with the convention will automatically have a place on the EU list, but he ended his email with this tantalising note: “That being said, Article 30 of the EU SSR states that the regulation shall be reviewed for potential alignment 18 months before the HKC enters into force.”

That suggests to me that there is a possibility that these additional requirements could be dropped if it was decided to align the EU SSR with the convention. Dr Mikelis is not convinced: we exchanged emails over the weekend and he expects the European Commission to maintain its current position after that review, which he said does not create a better standard, only a more-demanding one.

Even if the commission were to abandon its additional requirements – which would be welcomed by many – that would open up a whole new can of worms: facilities that had spent considerable sums upgrading to meet EU requirements so as to attract European vessels for recycling would find themselves competing against others that had not made those investments.

There would be a big scrap about that.

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