In light of Maersk announcing its entrance in the ship recycling sector in Alang, the company has faced criticism on how it handled two independent cases to ship recycling. Therefore, the company responded to the ship recycling criticism, by making its ship recycling procedures stricter.
One was in relation with the FPSO North Sea Producer that was sent by its new owner to a ship recycling yard in Bangladesh, despite Maersk 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 refers to 14 chartered-in Starflotte ships whose contracts Maersk wanted to end ahead of time in 2014. In the final agreement with the owner, 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.
Consequently, the company’s Head of the Sustainability Council, Claus V. Hemmingsen, has responded to these cases by tightening its procedures:
He firstly stated that the company has been actively participating and collaborating with the yards in Alang, India with the goal to improve the conditions.
It is regrettable that in spite of these initiatives there are examples of how we have pushed in the opposite direction of our own policy.
… Claus V. Hemmingsen highlighted.
He continued that in the future, the company will make sure that the contracts will have a strong incentive for ship recycling to be carried out responsibly.
Maersk has already stated its opinion in support of the Hong Kong Convention, as in 2009 it introduced a responsible recycling policy. Yet, the company stated that it has been unsuccessfully waiting for seven years on a global agreement concerning ship recycling.
Following, in 2016 the company tightened 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% of the highest recycling price, 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 Maersk’s standards. When the vessel has been operating on behalf of others beyond a period of 24 months, 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.
As Claus V. Hemmingsen commented
With these adjustments, Maersk expands the responsibilities that the Group takes to ensure responsible ship recycling. The tightened policy further clarifies the fact that Maersk will not enter into contractual agreements that encourage the new owner to find the highest price for steel in the future.
He concluded that they will keep their commitment and will to collaborate with the Alang yards.
