Countdown to HKC implementation: industry optimism amidst challenges

"We expect a substantial number of ships coming in for recycling from various segments, which will alter the current dynamics." 

-Hitesh Vyas (Wirana Shipping DMCC)

Mr Vyas explained, "We expect a substantial number of ships coming in for recycling from various segments, which will alter the current dynamics."

Regulatory restrictions were also emphasised by Mr Vyas, who pointed out that the Basel Ban and EU Waste Shipment Regulation limit the HKC’s scope by excluding ship recycling facilities in non-OECD countries.

Mr Panagakis elaborated on the legal implications for owners, P&I clubs and underwriters, highlighting their impact on industry standards. He also stressed the need for stakeholder engagement and cross-industry collaboration, particularly in areas like material declarations and lifecycle assessments.

Despite the challenges, the panel identified several opportunities and actions to ensure the successful implementation of the HKC.

"We are now entering [the era of ] environmentally safe ship recycling. We need to work together; stop pointing fingers and focus on synergies."

-Nikolas Panagakis (Nick Environmental Services)

Mr Panagakis emphasised global standardisation, stating, "We are now entering [the era of ] environmentally safe ship recycling." He called for cross-industry collaboration, asserting, "We need to work together; stop pointing fingers and focus on synergies."

This found favour with Mr Vyas, who suggested harmonising regulations by aligning existing frameworks with the HKC to reassure shipowners about compliance requirements.

Mr Fewster offered insights into the banking sector’s role in promoting responsible ship recycling. He explained ING’s approach, stating, "We don’t want to be the enforcers; it’s about encouraging good behaviour and fostering dialogue."

"We don’t want to be the enforcers; it’s about encouraging good behaviour and fostering dialogue."

-Stephen Fewster (ING)

When asked how financial institutions can enhance transparency and traceability in the ship recycling supply chain, he clarified, "[banks] do not finance ships at the end of their life. By the time they are recycled, we have already been repaid, ending our relationship with the client."

However, he stressed that banks can exert influence, "We can withdraw capital from industries exhibiting undesirable practices." He suggested banks could request reports related to ship recycling processes and collect necessary documentation once recycling is complete.

Regarding the impact of the Corporate Sustainability Reporting Directive and Corporate Sustainability Due Diligence Directive on financial risk for managed portfolios, Mr Fewster acknowledged increasing pressure on banks to advocate for improved ESG standards, "We must push for better ESG standards because all our stakeholders demand it."

He also discussed the potential expansion of the Poseidon Principles to encompass ship recycling, although noted such discussions are in their early stages.

The webinar highlighted several other ongoing debates within the industry. Key discussions centred on the adequacy of the HKC, with differing views on whether it is sufficient or requires enhancement. Questions persist regarding the standardisation of HKC-certified facilities and whether they all adhere to the same standards. The debate between the EU Ship Recycling Regulation (EUSRR) and the HKC continues, with some advocating for the adoption of EUSRR as the global standard, while the panel emphasised supporting the global HKC.

The panel said accidents at ship recycling facilities stem from implementation issues rather than HKC requirements. They suggested high-quality ship recycling facilities in non-OECD countries should be considered for EU-flagged vessels.

Poll questions gauged industry sentiment, revealing moderate optimism about resolving inconsistencies between the HKC and Basel Convention. Most participants believed ship recycling facilities in the Indian subcontinent were only partially prepared to meet HKC requirements by June 2025. There was a general consensus that ultimately the HKC would elevate ship recycling standards worldwide, albeit sufficiently rather than spectacularly.

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