In Alang, the word is spreading

Ship recycling in India has been synonymous with poor working conditions and environmental risk. Then a few pioneers began investing in equipment and people, paving the way for first-mover Indian shipyard Shree Ram to win a contract to recycle two A.P. Moller - Maersk vessels. With help from the company's onsite team, Shree Ram is changing.

The call to stop work came when M. D. Arif stepped over the yellow and black tape.

The 21-year-old, a newcomer to the Shree Ram shipyard, had crossed the marker on the vesselʼs deck that roped off a 30-metre drop to the ground. Capt. Abhay Kumar, A.P. Moller - Maersk's QHSE Superintendent, stopped work and explained the danger and the importance of respecting the perimeter. He also reminded Arif that he had the authority to stop work himself if he saw something unsafe.

A few days later, Arif did just that when he saw two people on a vertical ladder at the same time. Only one person is allowed.

“The two guys on the ladder have been here longer than me, but that didnʼt bother me,” says Arif, reflecting on the safety culture that has emerged during the time he has been at Shree Ram. “As long as I did the right thing, I donʼt see any problem, and the safety supervisor supported my decision. I would do it again.”

Arifʼs experience is part of a wider improvement of plot no. 78, one of four owned by the Shree Ram Group in Alang. The facility was upgraded and certified to the standards of the Hong Kong Convention, an agreement which aims to ensure that ships, when being recycled after reaching the end of their operational lives, do not pose any unnecessary risks to human health, safety and to the environment. It was then audited under the A. P. Moller - Maersk Responsible Ship Recycling Standard after which two of the company's vessels arrived for recycling in June of 2016 along with an onsite team.

Standards urgently needed

Ship recycling on beaches remains an inescapable part of the shipping industry. In 2016, as much as 87% of the worldʼs ships were dismantled on beaches in India, Bangladesh and Pakistan, typically under poor working and environmental conditions. The underlying economics are straightforward: vessels are recycled where the highest price for the steel can be attained. Lower standards mean lower costs, which make these shipyards more competitive than those with higher standards.

While most large shipping companies have responsible policies for the recycling of vessels, these policies usually only cover their own vessels. Therefore, a ship sold off just before ʼend of lifeʼ will most often end up on the beaches anyway. With a responsible ship recycling policy for own vessels in place since 2009, it was clear to A.P. Moller - Maersk that more was needed.

One response was to extend the ship recycling standard to include requirements when selling off vessels, thus removing the financial incentive for a new owner to recycle in substandard yards in the first two years after the transaction. Also, an opportunity arose in 2014 when a few ship recycling yards in Alang – the heart of Indiaʼs ship recycling industry – began upgrading in order to comply with the Hong Kong Convention, which sets global minimum standards for safety and environment.

“Most importantly, we decided to work with Indian yards that have been certified as capable of recycling vessels according to the Hong Kong Convention, aiming to improve further and reach the level of the Maersk standard,” says Annette Stube, Head of Sustainability in the Transport & Logistics division.

“In the coming years, with an increasing number of vessels to be recycled globally, it is urgent that we find a solution that embraces social and environmental aspects in addition to the financial ones. When we engage a yard in Alang, we want to guarantee that the yard is not only equipped to work responsibly, but will actually act accordingly.”

This explains A.P. Moller - Maerskʼs onsite team and the contractual right to stop work if procedures are not in accordance with the companyʼs standards, which go beyond the Hong Kong Convention on safety, social and environmental issues.

Understanding safety

Capt. Abhay Kumar began working at plot no. 78 when the two A.P. Moller - Maersk vessels arrived. He is responsible for supervising safe and responsible ship recycling operations, in line with company standards. This includes the authority to stop work, which as of 1 December 2016 has been exercised 17 times – including when Arif came close to that sharp drop-off. Kumarʼs ambition is, however, that things shouldnʼt come to that at all:

“The main challenge has been changing mind-sets throughout the yard. We have worked to make everybody understand how safety works and what our standards demand.”

A year ago, Arif embarked on the 1,700 km journey from Kolkata to Alang to work for Shree Ram. His older brother, who has been there for five years, encouraged him to come. After starting as a helper he went on to become an engine mechanic, dismantling the engines in the vessels.

“In the beginning, we worked on vessels where the owners did not have representatives on the ground, so I didnʼt get much training. This has changed since Maersk came in and Iʼve received a lot of training on the job,” says Arif.

“The next step would be to become an engine room supervisor, and then a general supervisor. There is a hierarchy and I want to continue moving upwards while undergoing training and working safely.”

A vision for Alang

In the backyard of plot no. 78, Manoj Sukla works as a gas cutter. He receives large, cleaned parts of the vessels from the front yard and cuts them into smaller pieces. He knows the business well after 14 years in Alang – the last 10 with Shree Ram – and he has witnessed the changes since A.P. Moller - Maersk's arrival.

“I used to cut the steel on sand, but now we have had an impermeable floor put in, so there is no dust or mud to get in the way and this makes our work hassle-free.

Also, each gas cutter now has a dedicated helper who sweeps the area, so I just concentrate on doing a good and thorough job,” he explains.

With A.P. Moller - Maersk, safer working procedures have been introduced. An example: The gas cutters used to leave their cutter connected to the gas cylinder during tea and lunch breaks, which led to small leaks and fire hazards. Seeing this, Capt. Kumar intervened and now the gas is shut off during breaks.

“Dormitory accommodation is provided and we have water, so I can basically live the same way here as I would at home. The word is spreading here in Alang and people want to join us,” says Manoj Sukla.

A.P. Moller-Maersk has tightened its approach to ship recycling in response to two separate cases, which are independent from the decision to enter Alang.

One relates to the FPSO North Sea Producer, which was sent by its new owner to a ship recycling yard in Bangladesh, despite the company stipulating in the contract that the production unit, at the end of its lifetime, was to be recycled according to the Hong Kong Convention.

The other case concerns 14 chartered-in Starflotte ships whose contracts A.P. Moller-Maersk wanted to end ahead of time in 2014. In the final agreement with the owner, A.P. Moller - Maersk incentivised recycling at the best price, which effectively means recycling at sub-standard yards, which is what the owner chose to do when the vessels were returned. In the latter case, A.P. Moller - Maersk has publicly acknowledged and expressed regret that it indirectly incentivised the owner to recycle at sub-standard yards.

“We have actively participated in, and worked directly with the yards in Alang in India to improve conditions there and to influence the industry as a whole,” says Group Vice CEO and Head of the Sustainability Council, Claus V. Hemmingsen. ”Therefore, it is regrettable that in spite of these initiatives there are examples of how we have failed to ensure compliance with our own policies. In the future, we will ensure that our sales contracts contain a very strong incentive for ship recycling to be carried out responsibly.”

In 2009 A.P. Moller-Maersk introduced a responsible recycling policy and expressed its support for the Hong Kong Convention. Procedures were further tightened in September 2016 in order to minimise the financial incentive for buyers to recycle irresponsibly.

The new contract terms are based on the value of the vessel at the time of sale. If the value is low (less than 25% above the highest recycling price), A.P. Moller - Maersk will not divest but will recycle the vessel according to its standards.

If the value is higher (25-40% above the highest recycling price), the new owner will be required to operate the vessel for a further two years or to recycle in accordance with A.P. Moller - Maersk's standards. When the vessel has been operating on behalf of others beyond a period of 24 months, A.P. Moller - Maersk can no longer take on this extended responsibility.

If the value is high (more than 40% above the highest recycling price) the vessel can be resold without restrictions, as there is no financial incentive for the buyer to recycle at this point in time.

“With these adjustments, Maersk expands the responsibilities that it takes to ensure responsible ship recycling. The tightened policy further clarifies the fact that Maersk will not enter into contractual agreements that indirectly encourage the new owner to find the highest price for steel in the future,” says Claus V. Hemmingsen.