Green Ship Recycling: Environmentally Responsible and Economically Smart

Green Ship Recycling Evan F. Sproviero Trader / Head of Projects & Finance CMA - Shipping 2014

GMS GMS Background Current Headquarters Dubai, UAE Founded in 1992 , GMS began business through the acquisition of naval vessels from the US Maritime Administration Founding Dubai (UAE), Maryland (USA), Shanghai (China), Singapore, and Tokyo (Japan) , GMS is the only cash buyer with local representative offices in all five major recycling markets Offices Clients Ship owners, Banks, PE firms, Brokers, Ship Recycling Yards Vessels Concluded Negotiated over 2,500 ships so far......and counting ! Salient Points • World’s first ISO 9001:2000 certified Cash Buyer • Developed a unique Green Ship Recycling program together with a leading IACS class society • Employs over 50 employees globally and about 300 crewLloyd’s List has ranked President of GMS, amongst the Top 100 Most Influential People in Shipping for the last 4 consecutive year ! CMA - Shipping 2014

Agenda Environmentally Responsible and Safe Ship Recycling Hong Kong International Convention European Regulation Where do things stand today? Facts from the field Closing Thoughts CMA - Shipping 2014

1.1 Environmentally Responsible and Safe Ship Recycling What are the options to owners? • Ignore CSR • Create a robust CSR program • Sinking ships • Resell to trading buyers (assuming they exist!!!) • Sell as is where is...don’t ask, don’t tell • Other • Create own program / follow Guidelines on Transitional Measures for Ship-owners Selling Ships for Recycling • Use Cash Buyers for Green Ship Recycling CMA - Shipping 2014

1.2 Importance of Ship Recycling – Economically Smart and Environmentally Friendly Engine Furniture Electrical Cables Chilling Compressors Steel Scrap Kitchen Ware Waste <2-4% (only!) Re-Rollable Steel Motors Pipes Spare Parts When properly handled, ship recycling is, without question, a Green industry! CMA - Shipping 2014

1.3 Importance of Ship Recycling – Socio-Economic Benefits of Ship Recycling • As per Institute of Scrap Recycling Industries: • It takes four times as much energy to make steel from ore. • Benefits of using recycled steel instead of ore to make new steel: • Savings in energy: 74% • Savings in virgin materials: 90% • Reduction in water use: 40% • Reduction in water pollution: 76% • Reduction in air pollution: 86% • Reduction in mining wastes: 97% • Reduction in consumer waste generated: 105% CMA - Shipping 2014

2. Hong Kong International Convention • Adopted: 15 May 2009 • Presently: Guidelines Entry into force 24 months after: • At least 15 States have either signed / accepted / approved it • Not less than 40% of the gross tonnage of the world’s merchant shipping • Ship recycling volume not less than 3% of their combined tonnage CMA - Shipping 2014

2.1 The Ship: Inventory of Hazardous Materials (IHM) • New ships: IHM on board to identify where Hazardous Materials are located in ship’s structure or equipment, their location and approximate quantities • Existing ships: shall comply no later than 5 years after entry into force or before going for recycling • IHM shall be maintained throughout the operational life of the ship reflecting new installations containing Hazardous Materials and changes in ship structure/equipment • Before recycling IHM to incorporate: operationally generated wastes and stores CMA - Shipping 2014

2.1 Inventory of Hazardous Materials (IHM) Surveys: • Initial: before the ship is put in service / before issuance of IHM • Renewal: not exceeding five years from last survey • Additional: upon the request of the s/o after a change/ replacement/ repair of structure, equipment, systems, materials, etc. • Final: IHM is in accordance with the HKC SRP is properly reflecting the content of the HKC SRF hold authorization CMA - Shipping 2014

2.2 The Ship Recycling Facility: Requirements • The SRF shall have management systems, procedures and techniques which: • Protect the health of the workers and the surrounding population • Protect the environment by minimizing the adverse effects caused by Ship Recycling CMA - Shipping 2014

2.3 Ship Recycling Plan (SRP) • Ship specific • Developed according to the information provided from the s/o • Should maintain “Safe for entry” and “Safe for hot work” conditions • Identify a management system for the Hazardous Materials stated in the IHM • Environmental Friendly disposal of the Hazardous Materials CMA - Shipping 2014

2.4 Ship Recycling Facility Plan Establish a policy for safety and protection of the environment System for implementation, achievement and continuous improvements of the goals and standards of the recycling operations Identify responsibilities and training of the workers Emergency preparedness plan Monitoring, record keeping and reporting all practices and incidences / accidents CMA - Shipping 2014

3. European Regulation • The European Regulation has come into play through the European Commission’s awareness that the Basel Convention does not properly address ship recycling and the EU needed some regulatory framework to govern ship recycling before the Hong Kong Convention comes into force • European Regulation on Ship Recycling – brought into force on 12/30/13 • The ER is very similar to HKC • Encompasses most of its mechanisms and does not contain contradictions that could damage prospects of HKC (with one exception, ie build structures..) • Will likely accelerate the progress of HKC • Types and sizes of ships, criteria, etc. fall under same scope as the HKC except the ER only applies to European Flagged ships (and visiting ships to have IHM) CMA - Shipping 2014

3.1 ER and HKC Similarities • The EU and HKC have similar requirements for ship owners : • Same scope • Same structure for control of hazardous materials with little deviation and provisions of IHMs (both three part IHMs based on HKC) • Same frequency of surveys • Same requirements for Port State Control and what are/are not detainable deficiencies (after 5-7 years, non EU flagged ship will have to have on board a statement of compliance and IHM in order to call EU ports) • Enforcement through either warning, dismissal, detention, or exclusion CMA - Shipping 2014

3.1 HKC and ER Similarities – Cont. • Similar requirements for ship owners continued : • ER requires tankers to arrive gas free safe for hot works while HKC allows for gas free safe for man entry or hot works depending on local regulations of the recycling State • ER says recycling facility may reject ship if the condition is not in line with IHM (difficult to say how this would work in practice) • ER and HKC define Cash Buyers as ship owner – there is no distinction made between the responsibilities of each participant and therefore no clear definition of the sale process • ER and HKC both unable to guarantee their enforcement CMA - Shipping 2014

3.2 European Regulation – Requirements for Facilities • ER has very similar requirements as the HKC for the facilities, with the following subtle differences: • “operate from build structures”; • demonstrate “the control of any leakage, in particular in intertidal zones”; and • ensure “the handling of hazardous materials, and of waste generated during the ship recycling process, only on impermeable floors with effective drainage systems”. • The important point here is the political maneuvering that took place to remove the “beaching ban,” although there is now the requirement to “operate from build structures” which has not been defined • It is now up to the European Commission to interpret and properly implement the European Regulation in order to determine its chances of becoming effective CMA - Shipping 2014

4. Where do we stand today? Shipowners: • CSR not as prevalent among Shipowners • From our experience only Japanese and Scandinavian owners have shown some interest Ship Recycling Facilities: • Adopting ISO standards • Enhancing training of the workforce • Developing infrastructure • Complying with HKC and ER CMA - Shipping 2014

4.1 Historical High • 1985: EX – Record Year • 42.6 Million Dwt • 9 Million LDT • 2012 • 56.5 Million Dwt • 11.7 Million LDT • 2013 • 46.78 Million Dwt • 9.6 Million LDT • 2014 • 4.06 Million Dwt • 0.86 Million LDT CMA - Shipping 2014

4.2 PricesBaltic Demolition Assessment (BDA): 2011 - 2014 CMA - Shipping 2014

4.3 Green Recycling Volumes / GMS Green Ship Recycling Program (GSRP) • Total vessels recycled in 2012: about 1080 • Total vessels with “Green” Terms: about 1% - 2% to the best of our knowledge • GMS has created the world’s first Green Ship Recycling Program (GSRP) in conjunction with a leading IACS class society in order to offer environmentally conscious Owners a reliable and cost effective option for Green Recycling CMA - Shipping 2014

5. Facts from the field CMA - Shipping 2014

5. Facts from the field Infrastructure for lifting heavy materials CMA - Shipping 2014

5. Facts from the field Pile of steel rods Areas of storage for pumps and other materials CMA - Shipping 2014

5. Facts from the field Storage and handling of Hazardous Materials CMA - Shipping 2014

5. Facts from the field CMA - Shipping 2014

6. Closing Thoughts • A vibrant ship recycling industry is essential to bring stability to the shipping industry. • IMO’s Hong Kong Convention has created clear guidelines for the safe and environmentally friendly recycling of ships • Progressively, more Ship Recycling Facilities are putting significant efforts to comply with the Guidelines of the HKC • Shipowners have to develop their CSR when it come to ship recycling • SHIP RECYCLING IS GOOD FOR THE ENVIRONMENT!!! CMA - Shipping 2014

Green Ship Recycling: Environmentally Responsible and Economically Smart