Breaking the stalemate

What are the current and future challenges in the ship recycling industry and what is Maersk’s take on how to solve them? Read this feature story by John Kornerup Bang, Head of Sustainability Strategy & Shared Value at A.P. Moller - Maersk.

Alang Maersk Ship Recycling

 

Ship recycling is an inherent part of the value chain of shipping. And it is probably the part of the value chain that the shipping industry can be least proud of. 

For decades, ship recycling has mainly been carried out at sub-standard yards in India, Bangladesh and Pakistan, jeopardising the safety of workers and the integrity of the surrounding environment. As many as 87% of the ships that were dismantled in 2016 ended their lives on beaches in these three countries. 

The underlying economics are straightforward: vessels are recycled where the best price for the steel can be attained. Lower standards mean lower costs, which make these shipyards more competitive than those with higher standards.

Most large shipping companies have responsible policies for vessel recycling. However, these policies usually only cover their own vessels, and a ship sold off just before ʼend of lifeʼ will most often end up in a substandard yard anyway. 

What remains is a lack of progress when it comes to ship recycling practices, policies and standards; a stalemate that we at Maersk have decided that we will try to break.

Maersk tightens its ship recycling procedures

Maersk is introducing contractual steps to ensure that its sales contracts include a strong financial incentive for ship recycling to be carried out responsibly.

 

Changing conditions on the ground

Since 2009, A.P. Moller - Maersk has had a responsible ship recycling standard. Our standard goes beyond the Hong Kong convention as it does not allow blocks to fall in the intertidal zone at all and covers social issues based on international standards. This has been extended to include ships that we sell near end of life to eliminate, in nearly all cases, the financial incentive to recycle irresponsibly.

In 2016, we began sending ships to selected yards in Alang – the heart of Indiaʼs ship recycling industry. A handful of leading yards had begun upgrading in a way that meant they were close to being able to comply with our standard regarding both safety, human rights and the environment. 

The purpose of working with yards in Alang is to use our commercial power to change conditions on the ground and build leverage to transform the industry as a whole. Our approach is to sign commercial deals with the best yards, where we accept a lower price for the ships than what is normally paid in Alang. At the same time, we commit to helping the yards upgrade their practices while contractually requiring full implementation of our standard controlled by onsite supervision throughout the process as well as quarterly audits by third parties. 

By engaging with yards on the ground, we have been able to accelerate investments even further, seeing yards reach our standard for responsible ship recycling.

Responsible ship recycling in Alang is possible

More than one year after the arrival of two Maersk vessels to Alang, the recycling of Maersk Wyoming and Maersk Georgia was completed with success in 2017. A twisted ankle and a minor gas leak were the most severe health, safety and environmental issues.

Punching above legal compliance

In April and May of 2016, our first two vessels, Maersk Georgia and Maersk Wyoming, arrived in Alang at the Shree Ram Group’s plot no. 78 for recycling. A bit more than a year later, the recycling of the vessels was completed, proving that responsible ship recycling in India is possible – if the ship owner insists on a responsible standard and ensures, on the ground, that the standard is implemented.

The six vessels we have sent to three yards represent the very tip of the ship recycling iceberg. The purpose they fulfil, however, is to build a case for responsible ship recycling in Alang, where collaboration and investments made by yards drive performance above legal compliance.

Our vision is to be part of transforming the entire ship recycling industry in Alang.

Our vision is to be part of transforming the entire ship recycling industry in Alang. 

Maersk has been heavily criticised by some stakeholder groups for this. The claim is that we are sending ships to Alang to save money, and that it is irresponsible to work with the yards before they are fully compliant. 

For A.P. Moller - Maersk, it would have been less costly to continue to recycle a few vessels in China every year and sell off other ships before end of life, or chartering tonnage rather than owning vessels. This approach does not drive change in those places where 85% of ships are recycled, most often under unacceptable standards. We believe that being on the ground could help solve this industry-wide problem.

The Ship Recycling Transparency Initiative

As a first step towards full transparency, Maersk has been instrumental in establishing the Ship Recycling Transparency Initiative in 2017. A group of founding partners, including other shipowners, financial institutions and shipping industry customers, will strive to create an overview of practices and options through disclosure, as well as ensuring that the ship recycling debate takes place on an informed basis.

Go to the press release about the launch

Global regulation, higher impact

Only global regulation will ensure a definitive stop to the critical conditions that we see today, but seven years after the Hong Kong convention was adopted in 2009, it has still not been ratified by enough countries to come into force. 

To accelerate developments, more shipowners need to become involved to create an even stronger market drive towards upgrades, and to create change on a scale where more than just a handful of yards are providing safe, fair and environmentally sound conditions. This requires far larger volumes than what we can establish on our own. 

To break the ship recycling stalemate, and to increase demand for responsible ship recycling, shipping companies and shipowners need to have a high standard, implement it on the ground and extend their responsibility to vessels that they sell off and charter. 

We will disclose our stance and practices related to all these aspects on this page. We urge all other ship owners to do the same.

It would have been less costly to continue to recycle a few vessels in China every year and sell off other ships before end of life… We believe that being on the ground could help solve this industry-wide problem.

 

Jakob Kornerup Bang

John Kornerup Bang, Head of Sustainability Strategy & Shared Value at A.P. Moller - Maersk

Why Maersk went to Alang 

In 2016, Maersk began sending ships to selected yards in Alang, India, based on two considerations. Foremost was the fact that a handful of leading yards in Alang had begun upgrading their facilities and practices in a way that meant they were close to being able to comply with the company’s standard regarding both safety, human rights and the environment. Secondly, while Maersk had been applying its own voluntary standard since 2009, which implies leaving money on the table every time it sends a ship for recycling, this had not proven effective in driving a solution to this industry problem any closer.

The result was that Maersk was spending money on exceeding compliance requirements, but without this effort resulting in a spread of responsible practices benefiting the environment or the workers. 

“It did not help narrow the competitive disadvantage our approach was giving us,” explains John Kornerup Bang, and elaborates:

“Working in accordance with our own standard did not create real change, and this is of particular concern to us. Because although we take responsibility for our own vessels, this is an industry-wide problem which we are linked to far beyond the vessels we own up to the time of recycling. We are also linked to the problems in ship recycling when we sell off vessels before end-of-life, when we charter vessels or when we place cargo on vessels belonging to other shipowners.”

The number of such vessels far exceeds the number of vessels that Maersk sends for recycling.