EU Breakthrough: Opening Doors for Global Ship Recycling Expansion
A recent agreement within the European Union (EU) regarding waste shipments is poised to eliminate a legal obstacle. This move is expected to open the door for numerous ship recycling yards outside the Organisation for Economic Co-operation and Development (OECD) to be added to an EU-approved list. The consultancy firm Sea Sentinels suggests that this development will provide much-needed capacity for shipbreaking, especially given the substantial tonnage slated for scrapping in the coming years.
The agreement, reached between the European Parliament and Council, pertains to the export of hazardous waste, including that contained in EU-flagged ships, to non-OECD countries. This is conditional on the receiving facilities demonstrating sustainable management and disposal practices aligned with EU regulations. The proposed amendment to the EU Waste Shipment Regulation (WSR) is anticipated to be ratified by the end of the year. The inclusion of a facility on an EU-approved list is a prerequisite for such exports.
Ships earmarked for recycling at the end of their operational life contain various hazardous materials, posing risks to human health and the environment if not managed and disposed of properly. Currently, the EU prohibits the export of such waste in EU-flagged ships under the Basel Convention. Additionally, the EU Ship Recycling Regulation (EUSRR) mandates that EU-flagged vessels must be recycled at approved yards.
Sea Sentinels’ Chief Executive, Rakesh Bhargava, emphasizes the significance of this EU agreement, suggesting that it marks a legal shift. It could allow non-OECD yards, which have long sought EU inclusion and comply with EUSRR standards, to finally gain approval. Bhargava believes this would significantly expand shipbreaking opportunities for owners of EU-flagged vessels, who have been limited by legal and reputational constraints to mainly European yards on the approved list.
As many as 32 recycling yards in non-OECD countries, including 27 in India and one in Bahrain, have applied for EU approval. Despite meeting EU standards, their inclusion on the EU list has been hindered by the Basel Ban. Bhargava sees the impending directive as a game-changer, leveling the competitive field for compliant yards worldwide.
Nina Porst, Executive Director for Climate, Environment & Security at Danish Shipping, sees the proposed WSR amendment as an incentive for non-OECD yards to enhance their standards and pursue EUSRR compliance. This could prevent a potential oversupply situation as a surge of older tonnage awaits recycling with the advent of environmentally friendly newbuilds. In addition, the EU Ship Recycling Regulation (EUSRR) sets stringent standards for ship recycling and requires all EU-flagged vessels to be recycled at a facility on a list of approved yards.
BIMCO, an industry body, estimates over 15,000 ships could be recycled in the next decade, potentially even more. The existing EU-approved yards, focused on niche recycling or offshore decommissioning, lack sufficient capacity for larger ocean-going ships. The proposed EU agreement could prompt more audits at non-OECD yards seeking inclusion, ultimately raising the level of sustainable shipbreaking capacity to meet the anticipated demand.
Sea Sentinels’ Bhargava highlights the importance of the pending directive in establishing a universally applicable regulatory framework for the global shipbreaking industry. He emphasizes the need for independent expert supervision throughout the recycling process to ensure compliance with environmental, social, and governance (ESG) standards.
The ratification of the Hong Kong Convention by Bangladesh and Liberia is seen as another positive step, providing a global regulatory framework for shipbreaking. However, Bhargava stresses that compliance with standards is not enough, advocating for continuous expert supervision to ensure accountability and adherence to regulations.
In conclusion, the potential inclusion of non-OECD yards on the EU-approved list is seen as a significant step toward expanding shipbreaking capacity, meeting the demand for recycling larger ships, and establishing a global regulatory framework for the industry.