MER Group to operate ship demolition yards in Puerto Rico and Europe.
A new company, Marine Environmental Remediation (MER) Group, hopes to take advantage of what it anticipates will be growing demand for facilities to dispose of ships in an environmentally friendly way both in the United States and Europe.
MER opened a yard at Roosevelt Roads, the former U.S. naval base in Ceiba, Puerto Rico, this year to recycle ships and is planning another in Albania, said Martin Vulaj, chief executive officer.
A growing number of shipowners are making a commitment to take better care in how their ships are disposed at the end of their life, even if they receive less money for their hulls from scrap yards.
In September, the U.S.-flag carrier Matson announced it would no longer recycle ships in South Asia where environmental groups oppose shipbreaking practices in India, Bangladesh and Pakistan.
Matson acquired Horizon Lines in May, and the company made the pledge after environmental groups criticized the disposal of a former Horizon Lines ship, the Horizon Trader. A recycling yard in Brownsville, Texas, acquired the ship in January.
Nikhil Shah, president of All Star Metals in Brownsville, said his company had removed toxic materials from the ship, including asbestos, lead, and PCBs, before selling it to a company for scrapping. He noted All Star had clearance from both the Maritime Administration and Environmental Protection Agency to sell the ship.
In early November, the NGO Shipbreaking Platform said “As far as we know, the Horizon Trader is still on its way to a South Asian breaking yard. At the moment it is in Namibia.”
With many older ships in the U.S.-flag fleet, MER sees strong potential for recycling of these vessels.
Among a list of 165 privately owned, U.S.-flag cargo ships of 1,000 gross tons maintained by MarAd are 51 which are more than 20 years old.
NGO Shipbreaking Platform and Seattle-based Basel Action Network (BAN) say the practice of “beaching” ships in South Asia—running them ashore and cutting them apart with torches on the beach is environmentally unsound because toxic material contaminates water and the shoreline. They also say shipbreaking as practiced at many yards is dangerous because workers are not given proper protective gear and some yards employ underage workers.
“Around 70 percent of the total gross tonnage is dismantled on beaches every year. Hence, only 30 percent of the total gross tonnage ends up being broken in responsible yards,” said Nicola Mulinaris, communications and legal advisor for the platform.
Matson issued a statement saying, “Because of concerns with recycling practices in South Asia, Matson has decided to expressly prohibit recycling of its vessels in this region going forward.”
Matson joins other shipowners with similar policies. NGO Shipbreaking Platform said 13 large shipping companies, such as Maersk and Hapag-Lloyd, follow sustainable ship-recycling policies and in August the Norwegian Shipowners’ Association made a no-beaching pledge.
Vulaj said the idea for starting MER came after Clarence LaMora, who now serves as the company’s chief operating officer, and Larry Kahn, MER’s chief commercial officer, met when trying to solve problems related to the scrapping of an old Navy hospital ship.
Kahn, an admiralty attorney, was assisting a client who had acquired the ship in an auction, intending to use it as a housing platform for offshore work. The EPA said it had to be either remediated of hazardous materials before being shipped overseas or scrapped in the United States. (The ship was eventually scrapped after extensive PCB contamination was discovered onboard.)
“I asked EPA, who do you recommend to help us with remediation?” Kahn recalled. The agency gave him LaMora’s name.
After 30 years in the Navy, where LaMora worked in both military intelligence and on the construction of new ships, he helped create a ship demolition branch for an environmental remediation firm.
The two discussed creating a new business that would scrap ships properly and eventually partnered with Vulaj, who was able to interest other investors in the company.
The company’s advisory board includes former New Jersey Gov. Christine Todd Whitman, who was EPA administrator during the George W. Bush administration.
“We are banking on the efficiency of our technology and creating a new clean market,” Vulaj said. “Our method is more expensive, but we think in the end that since it’s going to be the green and gold standard in the industry, we’re going to become the industry leader.”
“Ship dismantling is an absolute necessity. It is not as if this work cannot be done or that the industry would just go away,” LaMora added.
He noted there are anywhere from 80,000 to 90,000 “capital ships,” big vessels of more than 1,000 gross metric tons that are not pleasure yachts and small fishing boats, and 4-6 percent need to be disposed of at the end of their useful life.
“The west coast of Africa is littered with the hulls of ships that have exceeded their useful life, became considered obsolete and were just driven up on the beach to rot, releasing their environmental toxins and hazardous materials into the environment,” LaMora said.
Last year, there were 1,026 ships scrapped, with 62.5 percent dismantled in India, Bangladesh and Pakistan, according to NGO Shipbreaking Platform’s annual report.
NGO Shipbreaking Platform’s Mulinaris estimates around 70 percent of the total gross tonnage of ships that are scrapped each year is conducted on beaches.
“Hence, only 30 percent of the total gross tonnage ends up being broken in responsible yards,” she said. “Shipowners sell their ships to the beaching yards for considerably more money than what they could obtain by cooperating with modern ship-recycling facilities. But, by doing so, the maritime industry externalizes the real costs for proper recycling to poorer communities in South Asia. It is shameful for the industry that so many shipowners still choose to close their eyes to the realities on the ground and do not to face up to their responsibility and demand clean, safe and just ship recycling.”
In early November, she said dismantling a vessel in a responsible facility might “cost” around $200 per light-displacement ton (ldt) more than beaching it in South Asia.
(Light displacement ton is the actual weight of the ship. It is used to calculate the price a breaker will pay a shipowner for its ships and reflects demand by steel mills for scrap.)
Mulinaris explained that in India and Bangladesh a shipowner might get $300 per ldt and in Pakistan $290 per ldt. In Turkey the owner might only get $165 per ldt and in China $120 per ldt because ships are not beached and scrapping is more expensive.
LaMora noted scrap is always in demand from steelmakers, because it is so much less energy intensive and cheaper than making steel from ore and coal.
But Mulinaris said there is a decline in the number of ships being broken in India because of the import of cheap steel from China. Her organization says there has been a decline in the number of ships scrapped globally since the beginning of 2014. In 2014, in the first quarter, 301 ships were scrapped; in the second quarter, 286; in the third quarter, 202; and in the fourth quarter, 221. In 2015, in the first quarter, 262 ships were scrapped; in the second quarter, 213; and in the third quarter, 166.
“It is extremely hard to estimate the number of good yards worldwide,” she said. “For instance, we do know that in China there are around 90 ship-recycling facilities. Not all of them offer the same quality of services, but still workers’ living conditions seem to be considerably better than the ones in India, Bangladesh and Pakistan.”
She said there are good yards in Europe and Mexico and the International Ship Recycling Association has certified some of the best facilities in China and Turkey.
While the International Maritime Organization adopted The Hong Kong Convention on the Safe and Environmentally Sound Recycling of Ships in 2009, Mulinaris said it is not expected to enter force for many years and has been called inadequate by environmental groups.
The convention “was passed with the idea that it would be used to put an end to beaching ships. Now granted it doesn’t say specifically that beaching is prohibited; however, the intertidal area is not supposed to be where shipbreaking occurs under the Hong Kong Convention,” Kahn said.
The NGO Shipbuilding Platform said a European regulation on ship recycling that entered force on Dec. 30, 2013, and is expected to be applicable by 2017, goes beyond the requirements of the Hong Kong Convention by including demands for safe and environmentally sound disposal of hazardous waste downstream.
Kahn said the regulation essentially prevents the beaching of ships that are not first remediated of toxic materials if their owners are European, the ship is flagged in Europe, or the ship is in a European port. Alternatively and better, the ship should be sent to a recycling company that will not use the beaching methodology.
In addition to satisfying the regulation, Kahn and LaMora said many companies are adopting environmental policies internally to meet the social and political goals of their shareholders. Some banks are even requiring green recycling of ships.
A former executive director of the National Albanian American Council, located in Washington D.C., Vulaj said he is working on locating a European facility for MERS in Albania.
“You have a young and vibrant labor pool that is also less expensive than the labor pool in the U.S., for example, and you’re right in the belly of Europe,” he said. “This is one of those symbiotic opportunities where you can create jobs, stimulate economic growth and, at the same time, grow a business. It makes economic sense.”
MER is not the only U.S. company looking to establish a recycling facility in Europe.
The Port of Frederikshavn in Denmark said Modern American Recycling Services (MARS) is planning to set up operations in its harbor by 2017.
MARS scraps and recycles oil platforms and ships, and the port said its contract with MARS encompasses both a lease for a substantial area and “handling agreement concerning the scrap metal produced in connection with the scrapping activities.”
MER said it has developed several technologies that make dismantling a ship safer and more environmentally sound.
Rather than beaching a ship or dragging it ashore and removing sections from bow to stern, MER places the ship in slip and removes sections from the top down
Waste, such as slag and paint chips, is contained within what MER calls a “ship’s waistcoat,” essentially a giant bib that prevents hazardous materials from hitting the water.
Large intact sections, referred to as modules, are removed, “while maintaining the ship’s watertight integrity, trim and stability,” the company said.
The modules are then moved indoors for further dismantling, which the company said prevents the runoff of contaminated storm water and air emissions are filtered.
When the ship has been reduced to its lower hull area, what MER calls the “canoe,” it is put in what’s called a “peerless roller slip” and pulled out of the water, so the remaining demolition can be done in a cutting weir that contains waste materials.
LaMora said most of the companies in the shipbreaking industry “have not been environmental remediation companies, they are scrapping companies”
He said MER is different—“Our objective is to clean the ship. The demolition of the ship and the resultant revenue is a byproduct of the job. It really is a different mentality.”
He noted safety is equally important. “People like to focus on contamination or the potential for contamination, but I like to make sure our company, and the industry as a whole, remains very keenly aware that this industry, ship dismantling, is an enormously dangerous industry for personnel. We work with cranes, we work with torches, and we lift and move heavy weights constantly,” he said.
LaMora said, in addition to steel, ships have many non-ferrous metals such as brass or copper wiring, which command a higher scrap price. Components, such as anchors, anchor chains, pumps, and generators of a ship, can be salvaged or reused.
“Just because the ship we’re tearing apart has become obsolete doesn’t mean there aren’t a dozen or even a hundred sister ships out there that are still being maintained and need replacement parts that are no longer available because that ship has not been made in 20 years, and so consequently the replacement parts have not been made in 20 years,” LaMora said. “The richest source of replacement parts for existing ships are obsolete ships.”
