The maritime industry needs to step up to the plate to contribute to the global circular economy and ship recycling yards have a vital role to play.
Aside from the push for decarbonisation with the use of alternative fuels, shipping faces mounting public and regulatory pressure to curb the use of natural resources in production processes and thereby reduce the environmental footprint across the value chain.
The UN has targeted sustainable consumption and production as one of its Sustainable Development Goals and the EU has issued a Circular Economy Action Plan as part of the European Green Deal that seeks to change design and production processes to allow recycling of secondary materials and resources, as well as improve waste management.
Other industries such as automotive and aviation have already taken steps in this direction, but this new circular way of thinking is challenging the traditional mindset of the shipping industry.
Shipowners now need to think differently about their assets due to market demands for accountability on scope 1, 2 and 3 emissions. Scope 1 covers direct greenhouse gas emissions from a company’s business activity such as manufacturing, Scope 2 covers indirect GHG emissions associated with fuel and heating purchases for the company’s energy use, and Scope 3 covers indirect emissions across the company’s value chain, including those from ship transport.
Consequently, an investment decision needs to be based on a lifecycle assessment of a vessel’s environmental impact “from the cradle to the grave” with the aim of prolonging its lifetime and reducing resource use.
This shifts the focus to achieving maximum operating cash flow over the lifetime of a vessel versus the present business model that views the ship as an asset to be sold on for the highest profit.
The circular trend is likely to lead to more modular design in shipbuilding and standardization of vessel parts to enable easier repair, maintenance and retrofitting, as well as easier recovery and reuse of components and resources at end of life. This would be a shift from the present practice of bespoke newbuild orders with limited scope for later retrofits to accommodate future regulations.
Such an approach can have a beneficial financial spin-off in terms of reduced costs and higher revenue for the shipowner, as well as improve risk management, but will also require data transparency about product and asset lifecycles.
Shipping companies are already required to carry out proper waste management by maintaining an Inventory of Hazardous Materials under the Hong Kong Convention and EU Ship Recycling Regulation.
A similar approach could be adopted to trace ship components and materials throughout the vessel’s lifetime, based on input from the construction yard and equipment manufacturers, which could enable better reuse and recycling activities.
South Asian shipbreaking yards - mainly in India, Bangladesh and Pakistan - presently account for more than 80% of ship tonnage recycled globally. Yards in these countries are set to play an ever more important role to meet capacity demand as tonnage due for recycling is forecast to quadruple by 2033 due to the increasing size and number of ships built over the past two decades.
A primary material for recycling is steel, which makes up between 75% and 85% of a ship’s tonnage, according to an estimate by the Sustainable Shipping Initiative. These yards are therefore an important source of recycled steel that can be used in other sectors such as construction and electronics.
This can offset the high level of emissions in the steel manufacturing industry, which is one of the biggest emitters of CO2, as well as meet growing demand for green steel.
An estimated 97% of a ship is typically recycled as many other components can be reused in different business sectors to support the local economy. These include generators to provide auxiliary electricity supply for local schools and hospitals, engines and valves for industry, as well as kitchen, medical and fitness equipment and furniture in the commercial and health sectors.
Indeed, hundreds of retail outlets have sprung up around the Alang shipbreaking facility in India to serve the local demand for disused ship equipment, making it a vital source of employment and value creation for surrounding communities.
Shipbreaking yards in these countries therefore can represent part of the solution for maritime circularity provided safe and sustainable recycling practices, along with proper management of hazardous waste, are in place.
Rakesh Bhargava, CEO
Tel: +60 12 215 0137