What is the link between cash buyers and green ship recycling?

Currently, most of the active recycling yards in India have been certified as compliant with HKC, according to Best Oasis’ figures. And in a major move for the industry sector, Bangladesh has officially ratified the Hong Kong Convention, injecting some much-needed momentum behind the unadopted set of regulations that had been mouldering for years with little uptake among some of the sector’s largest players.

Whether Bangladesh’s ratification alone will make a difference for the percentage of vessels currently recycled under what Best Oasis considers green, or sustainable, recycling conditions remains to be seen, according to Mr Kourkoulis.

Major flag states like the Marshall Islands and Liberia still have not ratified the HKC, and – given their regulatory control over a huge percentage of the global fleet – their ratification would throw significant weight behind the push to require consistent minimum standards to protect workers in the facilities where vessels are taken apart. 

"Although we are still waiting for verification from Marshall Islands or Liberia for this to become mandatory worldwide, Bangladesh’s ratification is very important," Mr Kourkoulis says.

"Because of Bangladesh’s ratification, they will have to have recycling facilities in accordance with HKC. If we have both India and Bangladesh in accordance with HKC, we have only Pakistan left – which can’t operate due to economic issues at the moment – among the major south Asian players. If we take into consideration that HKC and green practices are gaining more and more interest each year, and keep in mind we have more facilities using green practices, then I believe green recycling activity will increase over the next few years," he says.

Best Oasis estimates around 40% of the vessels it buys for demolition each year wind up in a yard that adheres to green or sustainable recycling practices. "A bit more than one in three vessels, nowadays, are sold for green recycling practices," Mr Kourkoulis says, noting the figure is approximate and varies year to year.

But participation in green or sustainable recycling practices within the shipping industry, between vessel types and even within a specific segment, can vary greatly, according to Mr Kourkoulis. With a price spread of US$50 per light-weight tonne between HKC-compliant non-HKC compliant yards, smaller private vessel owners typically take the lowest cost option available to them, while larger companies with greater visibility and often shareholder input demand their vessels be sold for demolition at compliant yards with green recycling practices, he says.

Large vessel owners such as BW Offshore, Shelf Drilling, MSC, Maersk and Stolt Tankers have their own framework for ship recycling – as do many other shipowners – and set out clauses requiring the vessels it owns and charters to be recycled in a green and sustainable manner. These clauses are legally binding even when vessels are sold on to a third party such as a cash buyer.

Mr Kourkoulis says reputation and finance are intertwined for large players but for smaller players, lenders and regulators ultimately hold the most sway in improving practices.

"For smaller owners, they will be convinced to use green practices because of their financiers. For bigger companies, it’s because of their public profiles – but this also takes into account the financial aspect – because they have shareholders who weigh in on practices. The two areas are not independent, they are connected," he says.

So, what is the role of the cash buyer in navigating these different, and "often confusion-causing" sets of company, regional and not-yet-implemented global regulations? 

"It’s education," says Mr Kourkoulis. "We are the only people who have involvement in every part of the process."
"From the sale of the vessel to the last bit of the vessel being recycled, we have been involved with everything. And even after the recycling is complete, with some companies and some yards, we give feedback to both parties about how the process went and what can be improved."

Mr Kourkoulis says, "Education might be too tough a word for some people," but he and his company believe the process of educating and expanding awareness of green and sustainable recycling options and practices is "mandatory if you want to see fruitful results".
It’s a dynamic for the cash buyer of pushing for better understanding on both sides. 

"Many shipowners recycle maybe one ship every three years, so they may not have much awareness of the industry," he says, "and for yards, we explain to them exactly what they need to do to meet owner demands."

Ultimately, Mr Kourkoulis says cash buyers are "blessed to have, if not the most important, then one of the most important roles" in the process of moving the ship recycling and shipping industries forward toward improved practices for human safety and environmental protection in the very dangerous business of taking vessels apart.

"We stand everywhere in this process," he says.

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