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The draft law proposes creating a sustainable competitive domestic recycling market to minimise the problem of abandoned vessels and boost sectors of the economy to generate jobs, revenues and taxes
Ship recycling bill
Draft Law 1,584/2021, proposed by federal deputy Coronel Armando in April 2021, aims to lay down the framework of integrated policies and guidelines to foster a safe and environmentally sound ship recycling market in Brazil to compete with facilities in other developing countries. Even though Brazil has not signed the 2009 Hong Kong Convention (HKC) on ship recycling, the pending legislation broadly adopts standards enshrined in that IMO Convention, not yet in effect, and the EU Recycling Regulation (EU SRR) of 2013.
In addition to serving the domestic recyclable tonnage, the bill strives to set conditions for Brazilian shipyards to apply to join the EU SRR’s ‘European List’ of approved facilities for recycling EU-flagged ships. Currently, a US facility is the only one listed outside of Europe to recycle ships flying the flag of EU members.
The initiative pending at the Chamber of Deputies establishes procedures and guidelines and assigns responsibilities to shipowners, shipbreakers and public authorities. It applies to national ship recycling yards, ships, fixed (when towed) and floating platforms of any flag in Brazilian territory. Navy ships and small watercraft without mechanic propulsion are exempt.
Key features
The bill is centred on the control and management of hazardous materials on ships and their safe disposal at the end of the ship’s life cycle, ensuring that recyclers meet the guidelines issued by the IMO and ILO and requirements of the Basel Convention and Stockholm Convention, both signed by Brazil, among other regulations. Its main features include:
- Inventory of Hazardous Materials (IHM): under the draft law, new buildings of 300 GT and above must carry an approved ship-specific IHM on board, identifying certain hazardous substances in the ship’s structure and equipment, location, and approximate quantities. Regulations for adapting existing vessels and platforms to the provision and the materials that must be included in the inventory. In addition, there will be an Inventory Certificate (IC),a ship-dedicated document issued by the maritime authority and supplemented by the IHM.
- Ready for Recycling Certificate (RfRC): ship-specific certificate complemented by the IC and the Ship Recycling Plan (SRP)
- Ship Recycling Facility Plan (SRFP): prepared by the recycling company and approved by the authorities, the SRFP describes operational processes and procedures that are in place at the recycling facility, covering in particular workers’ safety and health, environmental protection, roles and responsibilities, emergency preparedness and response, and systems for monitoring, reporting and record-keeping the activity.
- Ship Recycling Plan (SRP): a ship-specific document developed by the ship recycling facility for each ship to be recycled. It should address issues not covered in the SRFP or requiring special procedures and be approved by the environmental authorities. Ships with 300 GT or less are exempt from carrying an SRP. Ready for Recycling Certificate (RfRC) is a specific certificate complemented by the IC and the Ship Recycling Plan (SRP). Once a partial or total recycling is completed, the facility’s operator issues a Statement of Completion to attest that the recycling process has been completed accordingly.
- Certificates and evidence of insurance: the Directorate of Ports and Coasts (DPC) of the Brazilian Navy will establish inspection routines and procedures for the certifications introduced by the proposed regulation. The maritime authority will also be entitled to require from shipowners evidence of hull and machinery and P&I insurance, including covers for cargo, crew, wreck removal and pollution liabilities.
- Inspections and surveys: new and existing vessels are subject to various surveys (initial, renewal, additional and final surveys) and inspections, which are conducted by the maritime authority. These are limited to verifying that a valid IHM or RfRC, as appropriate, is on board. A detailed assessment may, however, be carried out when neither certificate is available, or there is reason to believe that condition of the vessel does not match the certificate, or when no procedure is in place to keep Part I of the IHM up to date.
Control measures and responsibilities
Foreign ships may be subject to warning, detention, dismissal, or ban from Brazilian ports and offshore terminals if they fail to produce the required ship certification. In such cases, the maritime authority must inform the flag State. Those legally liable for ships and platforms are responsible for preparing to send them for recycling. They remain accountable whenever the vessels are anchored, moored alongside a berth or in shipyards.
Economic instruments
Bill 1,584/2021 allows incentive and funding measures to meet initiatives involving the prevention and reduction of solid waste in production and recycling processes, reverse logistics systems, and research on greener ship recycling practices and technologies. The draft law also enables states and municipalities to grant tax, financial and credit incentives to industries and entities dedicated to reusing, treating, and recycling domestic solid waste generated by ship recycling.
Legislative development
The bill is being processed in the Chamber of Deputies. If four of its committees approve the draft, it will be referred to the Senate without going through the plenary of the lower house.
On 6 December 2022, a couple of weeks before the parliamentary recess, the bill passed the third committee without amendments. Now, the Constitution, Justice and Citizenship Committee will review it. From there, it will be forwarded to the upper house for discussion and approval and then submitted for presidential sanction.
If sanctioned, the new regulation will be enforced from January following its ratification, with some devices coming into effect from January of the second year after the law’s enactment.
Global ship recycling market
Unlike shipbuilding, shipbreaking is a stable industry, even in times of global market decline, when more ships are scrapped before the end of their service life to eliminate maintenance costs. Almost 90% of the material extracted from demolished ships is recyclable, the United Nations Conference on Trade and Development (UNCTAD) estimates.
The UN intergovernmental agency reported that over 96% of the world’s ship recycling tonnage sold in 2021 (15.3 million GT) was dismantled in Bangladesh, Pakistan, India, and, from a distance, Turkey. There are no relevant ship recycling facilities established in South America. When broken up, the average age of vessels was 30 years, with offshore supply ships typically lasting longer (34 years) than gas carriers (30 years). The main types of vessels above 100 GT scrapped last year were tankers (54%), bulk carriers (18%) and offshore ships (8%).
UNCTAD predicts substantial growth in global maritime trade and accelerated fleet renewal in the coming decades as the world’s cargo-carrying capacity increases and the shipping industry gradually transitions to low-emission ships.
In this context, the ship recycling market should continue to grow with the world fleet development, but not without challenges. Initiatives such as the HKC and the EU SRR require recycling companies to adopt the highest standards and implement adequate environmental, social and governance practices to be certified to operate. At once, these internationally binding regulations disqualify most of the Asian shipbreakers who now dominate the global market and are considered by the ILO and NGOs to be sources of chronic violation of international environmental and labour conventions and treaties.
Domestic demand
Brazil has a significant fleet of platforms and support vessels serving the country’s vigorous offshore oil and gas industry. The National Agency of Petroleum, Natural Gas and Biofuels (ANP) estimates that more than a hundred platforms will be decommissioned in the next decade when they reach the end of their operational life.
The cabotage incentive program promises to increase the share of waterway trade in the transport matrix, attracting more foreign ships to carry domestic cargo on the extensive Brazilian coast and inland waterways. The current cabotage fleet has an average age of more than 16 years and is expected to be recycled over the next ten to twenty years.
Adding to the growing demand for sustainable ship recycling facilities, dozens of derelict or abandoned vessels, mainly in Rio de Janeiro, where recently a bulk carrier hit the iconic Rio-Niterói Bridge and brought the problem to public attention, pose a threat to navigation safety and the environment.
Although Brazilian shipyards are mostly modern and environmentally minded, they have not been contracted for new ship buildings due to low competitiveness in the international market and are largely idle. On the other hand, the current legal and fiscal framework hinders the development of a financially viable national ship recycling industry. It leads shipowners to send end-of-life ships for disposal abroad, incurring high transportation costs and potentially entailing environmental and occupational risks in places where shipbreakers are neither certified nor audited.
Prospects
There is an emerging need to expand global ship recycling capacity sustainably. Brazilian shipyards with good practices can equip themselves to join the international market and seek inclusion in the EU SRR European List as a third country, considering it is unlikely that the HKC will come into force in the foreseeable future due to low adherence.
A new government was elected and took office in January 2023. It remains to be seen whether the newly sworn-in president and his administration will effectively support the legislative initiative and create the conditions for developing the activity safe and clean.
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