Ballast Water Treatment

A shrinking market

Malcolm Latarche
Malcolm Latarche

01 March 2019

A shrinking market

Over the next five and a half years, there will be a boom in retrofitting ballast systems but unless there is another newbuilding surge thereafter, the market will shrink to something like 2,000 systems per year. That will mean a big shakeout will be on the cards for system makers. No doubt some manufacturers will decide earlier than others to quit the race, especially as there is now a very small window before they must put their systems through the revised G8 type-approval process.

The unexpected extension granted by the IMO in 2017 will have come as a bonus to owners of older ships. Many 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 by using 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 consolidations 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 remain approved 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 their view of the survivability of the OEM once 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.

Keeping the customers satisfied is another way to improve a manufacturer’s chance of survival. Exactly what assurances have been given to owners who have already fitted systems, we cannot know, but some companies did make public their commitment. As long ago as 2007, when Alfa Laval set out on the type-approval path for its PureBallast system, the company guaranteed buyers a refund of the system cost if type-approval was not granted.

Other makers may not have made public announcements, but some have demonstrated commitment to existing and potential new customers. RWO was one of the first to gain IMO type-approval for its CleanBallast system and notched up several system sales in the early days. However, as ratification of the ballast convention became more and more delayed, in 2015 the company suspended market activity.

The CleanBallast also had US AMS status, suggesting that the sector for ships trading to the US was important to it. However, the AMS concession is to end soon and RWO ended its market suspension this year and applied for US type-approval fulfilling an obligation to existing customers. It has also resumed marketing its system and will probably pick up more users.

As far as absolute guarantees of system efficiency and reliability go, few system makers would be in a position to offer those. Even the type-approval process recognises that under some circumstances systems may have problems achieving the required disinfection level. Exactly what the owner is supposed to do under those circumstances is very unclear and the consequences will doubtless be discovered during the experience building phase.

At least one maker is prepared to go a little further – EcoChlor’s new EcoCare guarantee might be seen as an industry first. So long as the system is operated in accordance with maker’s instruction, this ensures regulatory compliance with IMO, USCG and individual US state standards now and throughout the life of the system. In addition, the guarantee addresses system efficacy as it pertains to treating ballast water for invasive species contamination and it insures against financial penalties up to $1,000,000 relating to fines, port charges, delays and off-hire.

As part of the EcoCare guarantee, the company proactively tracks all ballasting operations with results reported via a Functional Monitoring Data Sheet and other remote monitoring tools. It also has a 24/7 international call centre for when crews and operators need support.

Finding a company that is prepared to stand full square behind its products is just part of the battle for buyers of new ships. The main problem is ensuring that the shipyard is willing and able to include the desired products within the newbuilding contract.

Many yards refuse outright to offer anything other than their supported equipment while others may be willing to accommodate the buyer at a cost. For the owner, the decision as to whether any additional charge is worth paying for a product that offers above average guarantees and warranties is one that only they can make.