A fresh look at the use of AI data to help avoid sanction headaches, counterparty due diligence, establishing an appropriate level of evidence, ESG (moral sanctions – self-regulation) and the role of human intuition and experience in interpreting data.
The 149,322–dwt bulk carrier Keoyang Orient (built 1997) has been sold by its owner H-Line Shipping Co. Ltd on the condition the vessel was recycled according to the standards set out in IMO’s Hong Kong Convention. A spokesperson for H-Line Shipping said, “It was not an easy decision to consider green recycling for the first time as Korean shipowner but this is the only right way since shipping needs to become greener as part of ESG/CSR to support sustainable shipping.”
Commenting on the deal, GMS trader Gyungbae Gil says, "GMS is delighted to help H-line Shipping recycle their vessel Keoyang Orient in a safe, clean and sustainable way. We believe H-Line is the first Korean owner to have opted for Hong Kong Convention (HKC) compliance and both welcome and anticipate more transactions of this nature in the months and years to follow.”
The move by H-Line Shipping is being seen in the wider context of a shift towards raising recycling standards across the whole of South Asia. At India’s recycling hub of Alang, 95 recycling yards are now HKC compliant and a further 10 Bangladesh yards are in the process of application. A call for even more green recycling yards has been made recently by the Asian Shipowners Association in anticipation of scrap volumes almost doubling next year to around 45.5m dwt, according to figures from leading brokers.
“This sale represents another important milestone in the transition to cleaner, safer ship recycling,” says Mr Gil. “We applaud H-Line Shipping for embracing the HKC and are honoured to have played a role.”
The container ship market will not see any significant recycling until rates fall to levels seen in 2016, according to Xeneta Chief Analyst Peter Sand talking on the GMS Podcast.
Mr. Sand said he believed strongly that a “sustained level of appallingly low freight rates” is needed for owners to opt for recycling, despite the current record levels for scrap steel.
Container ship owners, he says, are “loaded” after two years of making US100bn each year for the last two years and so not even remotely tempted by the record high scrap prices.
Pointing to an active second-hand market for box ships, Mr. Sand explains that owners are now “trading ships they have bought at record high prices for quite old skins” and that “everything that is capable of carrying boxes is sailing right now and making pocket loads of money.”
Mr. Sand expects the container market to remain firm for another couple of years and urges recyclers to “be patient” as “some of the old skins will find their way” to the recyclers’ yards.
In a wide-ranging discussion, Mr. Sand offers insight into the moves of German high street retailers Lidl into shipowning and the impact of Shanghai’s Covid lockdown on intra-Asian business.
In its latest podcast, GMS talks to leading shipping barrister James M. Turner QC of Quadrant Chambers about the challenges associated with scrapping large vessels and the moves towards better standards in India and Bangladesh.
Confirmation last week of Norway’s first jail term handed down to a shipowner for illegal scrapping has turned the spotlight back on the laws governing ship recycling. “It’s a minefield,” admits Turner referring to both the reputation risk and the threat of conventional litigation “if [shipowners] don’t get it absolutely right.”
Quizzed on what shipowners can do to protect themselves when recycling, Turner draws a distinction between a negative and positive approach.
“If you don’t want to be held liable, which is the negative approach, you have to bear in mind that merely because you no longer own the ship when it is taken to the yard, that may not be an answer to a claim brought against you.” He goes on to say, that although not yet tested in court, owners may be able to protect themselves to some extent by “requiring that [the ship] goes to a yard that is Hong Kong certified.”
A more positive approach he says, is to consider your company’s ESG aspirations and “pick a yard that has a good reputation, the right certification” and consider engaging a compliance monitoring service to oversee the dismantling, noting that GMS offers clients’ a sustainable recycling package via its Sustainable Ship & Offshore Recycling Program (SSORP).
Turner says he has sympathy for shipowners with recycling decisions on the table. “You’ve got an asset which can realise some money at the end of its life” and suggests owners should plan accordingly as their vessels approach end of life. Owners who fall foul of the law and find themselves with their “foot in the trap” do so with their eyes open he says, now that “it’s perfectly possible to do the right thing”.
Changes in the way ships are recycled at the waterfront is happening “as recycling yards come to experience that there is money to be made in doing a job properly”. Turner points to “so much of the world’s tonnage” that will be pushed towards recycling in order to meet the climate change goals.
GMS’s latest podcast is an insightful conversation with Julian Clark, Stephen Askins and Prachi Shah about how shipping is adapting to the latest “completely unprecedented” maritime and financial sanctions against Russia.
Ince’s Global Senior Partner Julian Clark and Tatham’s Senior Partner Stephen Askins, two of London’s leading maritime lawyers, discuss the challenges for shipping posed by an “unprecedented” range of sanctions against Russia with GMS’s legal counsel Prachi Shah.
The podcast guests share their views on what the latest sanctions mean for chartering contracts, sale and purchase deals, KYC considerations and how shipping companies and cargo interests can stay on the right side of OFAC. The legal trio also considers the extent to which sanctions against Russia are both a commercial and moral obligation.
Julian Clark reveals that law firms connected to Russia are shutting up their London offices “because the lawyers are saying we’re not prepared to work for this Russian firm anymore.” He adds, “I don't think we've ever seen anything like it.”
Summing up the challenge for many, Stephen Askins recognises the financial considerations of operating under sanctions. “It’s a really difficult situation. If you’re a shipowner or charterer, you want to be paid, and you want to know that you can discharge cargo at the destination you’re taking it because anything else… is going to cost you money.” He adds that shipping is still weighing up the commercial risk as the situation unfolds.
“Even if you think you know what the answers are on a Tuesday, the problem is it has changed by Wednesday, so we are all tiptoeing around this very, very carefully,” says Askins.
Established in 1992 in historic Cumberland, MD. (U.S.A), GMS is the world's LARGEST and FIRST ISO 9001 certified Cash Buyer of ships for recycling. With exclusive representatives in all of the major ship recycling markets in the world, GMS has negotiated about 3,500 ships for recycling since inception. In addition to its original office in the United States of America, the company continues to expand its operations with offices in Hamburg (Germany), Athens (Greece), Dubai (UAE), India (Bhavnagar), Singapore, Seoul (Korea), Shanghai (China) and Tokyo (Japan).
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