Close this search box.

Australia is keen at ship recycling

Australia is keen at ship recycling

The global shipping industry serves as a crucial driver for the worldwide economy, and shipbuilding plays a pivotal role in fostering economic growth and development. However, as ships reach the end of their operational lifespan, the issues of recycling, repurposing, or disposal come to the forefront. Presently, the ship recycling industry operates on unsustainable foundations that have adverse effects on both society and the natural environment. The majority of ships, accounting for approximately 90% of gross tonnage, are recycled in just three countries—Bangladesh, India, and Pakistan. These countries offer cheap labor, but their working conditions are often unsafe, and environmental pollution levels tend to be excessive (United Nations UNCTAD, 2021). Despite the unsustainable and unsafe conditions, shipowners find the option of recycling in these countries appealing due to the higher prices they receive for their ships.

Maritime security in Pacific requires India-Australia engagement

Efforts have been made to regulate the ship recycling industry. The Basel Convention of 2004 classified end-of-life ships as “waste” and mandated that ships flagged in OECD states should be recycled within OECD states. The Hong Kong Convention for the Safe and Environmentally Sound Recycling of Ships, adopted in 2009, extended this principle to all ratifying states and introduced conditions to enhance the safety and sustainability of recycling (International Maritime Organisation, 2022b). However, over a decade later, the convention is still not in force as 40% of the world fleet remains unflagged in states that have ratified the convention. Consequently, some states have felt compelled to take action, leading to the introduction of the European Union (EU) Ship Recycling Regulation in 2013. This regulation stipulates that all EU-flagged ships must be recycled at an approved facility (Directorate-General for Environment, 2022). Facilities from any country can be included in the list if they meet the safety and environmental requirements. There is anecdotal evidence suggesting that some ship owners switch ships away from EU flags just prior to recycling to bypass the EU regulation (Gourdon, 2019).

Modi government is keen in maritime development in the Bay of Bengal

The increasing stringency of ship recycling regulations coincides with an expected surge in ships for recycling. This surge can be attributed to surplus ships resulting from the post-pandemic global economy and the scrapping of substandard ships due to upcoming environmental regulations by the International Maritime Organization (IMO) starting in 2023 (Ford, 2022). Beginning in 2023, large ships engaged in international trade will be required to meet new efficiency and carbon intensity standards. Ships exceeding a certain Energy Efficiency Existing Ship Index (EEXI) threshold will need an enhanced Ship Energy Efficiency Management Plan (SEEMP) outlining steps for energy efficiency improvement. Additionally, each ship will be rated on a scale from A to E based on its Carbon Intensity Indicator (CII). Ships with an unacceptable rating will be prohibited from operating in states that have ratified the latest version of the MARPOL convention (International Maritime Organisation, 2022a). The CII rating has also been found to impact the value of ships (Chambers, 2023).

Suez canal traffic briefly disrupted

This convergence of developments in ship recycling presents an opportunity for the industry to thrive in Australia if a way can be found to reduce labor costs and minimize environmental impact. Ship recycling traditionally involves four methods: dry docking, pier breaking, landing, and beaching (Gourdon, 2019). Each method has its advantages and drawbacks. Dry docking reduces environmental pollution but still requires manual labor and incurs higher expenses due to dock maintenance. Pier breaking and landing involve less manual labor but result in high pollution rates. The beaching method is the most cost-effective but entails significant labor intensity and poses environmental concerns.

Why IHM require for the ships sending for recycling?

Given the higher labor costs in Australia and the stricter safety and environmental conditions, the ship recycling method needs to be reevaluated. One potential solution is to automate the ship dismantling process. Significant advancements in automation technology have been witnessed recently. Circular Marine Technologies (CMT), a startup, is developing a fully automated ship recycling process. CMT’s approach involves bringing ships ashore for cleaning using recycled wastewater and subsequently slicing the ships into sections, akin to slicing a loaf of bread (Bartlett, 2022). Breaking down ships into smaller sections enables easier automated handling with minimal manual labor requirements. CMT also suggests that methane captured from organic matter on the ship could be converted into cleaner fuels such as LNG or hydrogen to power the ship recycling facility. However, the feasibility of generating sufficient organic matter from the ships to power the entire facility remains uncertain. Overall, CMT asserts that automating the process will enable them to compete with facilities in South Asia in terms of pricing (Bartlett, 2022).

US faces disrupted cargo operation

The primary resource obtained from ship recycling is scrap steel, which can be recycled without compromising its structural integrity (unlike recycled concrete, which loses structural strength) (Planet Ark, 2020). As the steel-making process is energy-intensive, the demand for scrap steel, which utilizes 75% less energy than virgin steel on average, is relatively high (Planet Ark, 2020). Approximately 30% of global steel production is derived from scrap steel (Berlin et al., 2022). Most ships also contain leftover equipment and materials, such as radios or furniture, which are scavenged and sold in second-hand markets at many beaching facilities. To recover scrap steel from ships, some preprocessing is required, and integrating this step into the automated process would further enhance its circularity. Exporting scrap steel through the Port of Newcastle or utilizing it locally for steel products both present potential avenues.

Establishing an automated ship recycling facility at the Port of Newcastle could prove advantageous for its ongoing endeavors to diversify away from coal exports. The port precinct boasts ample vacant space dating back to the closure of the BHP steelworks in 1999, provides deepwater access, and possesses a skilled workforce of engineers—factors that favor such a development. The automated ship recycling facility is just one component of a circular economy ecosystem that could be established at the port, potentially accelerating New South Wales’ decarbonization strategy. The prospect of a ship recycling facility at the Port of Newcastle could drive industrial development at the port and in the Hunter region by creating a supply of recycled materials, particularly scrap steel. By adhering to the OECD, Hong Kong Convention, EU, and US conditions for ship recycling, a compliant Australian ship recycling industry would help address the growing backlog of end-of-life ships in a safe and sustainable manner.

However, the challenge with automated ship recycling lies in reducing costs to compete with beaching in South Asia. The capital investment required for constructing an automated recycling facility is likely to increase costs despite potential labor savings. The availability of carbon credits could contribute to the commercial success of the project. Australia’s carbon market operates through Australian Carbon Credit Units (ACCUs), which are tradable permits awarded to projects that avoid, reduce, or remove carbon (or its equivalent) from the atmosphere (Clean Energy Regulator, 2020). ACCUs can be traded to companies with unavoidable carbon emissions. By claiming ACCUs for recycled steel, the ship recycling facility can generate an additional revenue stream, making the process more appealing.

Nevertheless, Australia’s carbon credit market faces certain challenges. The participation of carbon-emitting companies is not mandatory, resulting in low and often volatile prices for ACCUs. Legislative changes could enhance the effectiveness and success of the scheme, and such changes are likely to occur in due course. In the meantime, it would be prudent to estimate the ACCU price at which a ship recycling facility at the Port of Newcastle could compete with beaching in South Asia.

Moreover, the Port of Newcastle’s development of an ambitious “Green Hydrogen Hub” opens up possibilities for green steel production (Port of Newcastle, 2020). Research advancements in Australia are accelerating the potential for green steel manufacturing, which utilizes green hydrogen produced through electrolysis with renewable electricity and water, along with carbon eventually sourced from the atmosphere. Consequently, the carbon footprint of green steel is significantly lower than that of traditional steel. The resurgence of steelmaking in Newcastle, supported by ship recycling, would be a remarkable transformation for the former “steel city,” particularly if it embraces green steel.

The establishment of a ship recycling facility at the Port of Newcastle would require the involvement of the private sector and policy support from the government. However, with increasing ESG (environmental, social, and governance) and SDG (Sustainable Development Goals) pressures on companies to comply with OECD, IMO, and EU recycling regulations, combined with the availability of ACCUs, ship recycling could become commercially viable in Australia and eventually position the country as a major player in this sector, as well as in the green steel industry.

Leave A Comment

All fields marked with an asterisk (*) are required