understanding esg requirements in determining residual ... a… · • the facility will provide a...

1www.gmsinc.net

Vagelis Chatzigiannis, Senior Trader – Responsible Recycling Coordinator at GMS

Understanding ESG Requirements in determining Residual Values of Offshore Assets

Brazil Offshore Finance Forum

2www.gmsinc.net

Established in U.S.A. in 1992, GMS is the LARGEST Buyer of ships & Offshore Assets in the world!

GMS has negotiated excess of 3,500 ships and offshore assets – average of 200 units per year for the past decade

Has undertaken excess of of 500 successful Towages just for wet tow

World's FIRST ISO 9001 (BV) certified Cash Buyer of ships for recycling.

GMS is also the FIRST and ONLY Cash Buyer to develop a Responsible Ship Recycling Program (RSRP)

GMS participated in deliberations leading to the adoption of the IMO’s Hong Kong Convention.


3www.gmsinc.net

• Team of experienced professionals capable of: Structuring “tailor-made” deals according to the needs of the seller Resolving technical matters Finding value in all types/age of vessels / offshore units Identifying the best options of recycling while considering applicable regulations and

guidelines Identifying recycling facilities capable of meeting the highest standards Maximizing value of an asset

• Experienced with taking over Rigs / Offshore units: Towed Floaters and Jack Ups across Atlantic & India Ocean “Insulating” against negative publicity by recycling in an environmental friendly and safe

manner

• Shipping Portfolio: Chartering potentials and bareboat possibilities Ship Finance / Ship Owning Investments in ships / project


4

Ship Recycling: A Sustainable Solution

Steel Scrap Re-RollableSteel Furniture

Spare Parts Pipes MotorsWaste <2-4% (only!)

www.gmsinc.net Brazil Offshore Finance Forum

5www.gmsinc.net

Common Questions:

Hong Kong Convention (HKC): Is it going to enter into force ? When ?

What’s the difference between Basel Convention, HKC, EU Waste Shipment Regulation and EU Ship Recycling Regulation?

Should I follow HKC or EU?

What is Environmentally Safe and Responsible Ship Recycling?

IMO’s Hong Kong International Convention for the Safe and

Environmentally Sound Recycling of Ships, 2009

EU Ship Recycling Regulation

The EU Waste Shipment Regulation and the Basel Convention

(Regulation 1013/2006 of the European Parliament and the

Council of 14/6/2006)


6www.gmsinc.net

• EU Waste Shipment Regulation (EUWSR) – EU Ship Recycling Regulation (EUSRR)

• If an asset, of non EU flag, departs from an EU port for recycling, it is obliged to be recycled in an OECD based yard with BASEL to apply (EUWSR).

• EU flag ships to be recycled in EU approved facilities (EUSRR)

• Hong Kong Convention

• ISO Certified yards and SOC• Factoring in Basel and ILO• IHM, SRP, FMP, Auditing and Reporting• 77 yards in Alang out of 131 are SOC with HKC certified (as of Sept 2019) • More than 50% of the recycling yards in Alang are already or working towards SOC

with HKC. • Still in the form of Guidelines -> DEVELOPPED BY IMO : GLOBALLY ACCEPTABLE


7www.gmsinc.net

Ship recycling volume of these 15 states should not be less than 3% of their combined tonnage (during the last decade)

Their combined tonnage represents not less than 40% of the gross tonnage of the world’s merchant shipping

At least 15 States have either signed / accepted / approved it Currently

• 13/15

Currently•About 29%

/ 40%

Currently• about

0.5%


8www.gmsinc.net

Source: Status of Conventions, IMO, September 2019

Contracting States of HKC

Current Status: 13 contracting stateswhose combined fleet is 29.42% of the gross tonnage of the world fleet and whose combined annual ship recycling volume in the last 10 years is 1,729,478 GT or 0.44% of the merchant shipping tonnage of the same States

Requirements for HKC Entry into Force: 15 or more States, with no less than 40% of the world’s shipping gross tonnage and combined recycling volume that is at least 3%of the gross tonnage.

Contracting State

Belgium (accession)

Congo (accession)

Denmark (accession)

Estonia (accession)

France (ratification)

Germany (accession)

Japan (accession)

Malta (accession)

Netherlands (accession)

Norway (accession)

Panama (accession)

Serbia (accession)

Turkey (ratification)


9www.gmsinc.net

Supply Demand Steel Prices… Ore, Finished

steel, Competing products Currency exchange rates Regulations

Factors Affecting the pricing


10www.gmsinc.net

61.50

49.83

34.76 39.67

45.65

36.70 33.99

12.30

12.18.0 4.3 6.3 9.7 7.5 6.4 2.3

-

10.00

20.00

30.00

40.00

50.00

60.00

70.00

2012 2013 2014 2015 2016 2017 2018 2019

Tons Scrapped (Dwt) Tons Scrapped (LDT)

Note: All numbers are approximatesNote: 2019 figures represent first half of the year


11www.gmsinc.net

0

5

10

15

20

25

30

2019 2018 2017 2016 2015

Recycled units: Floaters / Jack Ups/ LNGs: 2015 - 2019

FPSOs Semi Sub Jack Up Drillship LNG


12www.gmsinc.net

250.00

300.00

350.00

400.00

450.00

500.00

Steel Prices India

62.0064.0066.0068.0070.0072.0074.0076.00

INR

Annual Capacity• About 4,500,000 Lightweight – with expectation of up to

6,000,000 after new yards start operating

Number of Vessels• 2016: abt 318 vessels / 3,400,000 ldt• 2017: abt 232 vessels / 2,400,000 ldt• 2018: abt 258 vessels / 2,100,000 ldt• First half of 2019: abt 102 vessels / 800,000 ldt

Operating Yards• About 131 yards operating out of 152, with the

remaining 21 to be auctioned in the near future.• SOC with the HKC: 77 - LR: 1 , NKK: 31, Rina 59, IRQS: 11

(several yards more than 1 Class certification)

Note: All numbers are approximates


13www.gmsinc.net

400.00

450.00

500.00

550.00

600.00

650.00

Steel Prices Pakistan

100.00110.00120.00130.00140.00150.00160.00

PKR

Annual Capacity• About 3,000,000 Lightweight

Number of Vessels• 2016: abt 139 / abt 1,800,000 ldt• 2017: abt 123 / abt 1,500,000 ldt• 2018: abt 80 / abt 1,250,000 m ldt• First half of 2019: abt 21 / abt 70,000 ldt

Operating Yards• About 131 yards out of 135



14www.gmsinc.net

330.00

380.00

430.00

480.00

530.00

580.00

Steel Prices Bangladesh

77.00

79.00

81.00

83.00

85.00

BDT


Number of Vessels• 2016: abt 45 vessels / 600,000 ldt• 2017: abt 197 vessels / 2,100,000 ldt• 2018: abt 215 / abt 2,375,000 ldt• First half of 2019: abt 160 vessels / 1,820,000 ldt

Operating Yards• About 60-65 yards - Total number of yard about 152. • SOC with the HKC 1 yard



15www.gmsinc.net

Currency (TRY):• end June 2016: abt 2.95 to the USD• end June 2017: abt 3.5 to the USD• end June 2018: abt 4.7 to the USD• end June 2019: abt 5.8 to the USD


Number of Vessels• 2016: abt 121 vessels / abt 600,000 ldt• 2017: abt 189 vessels / abt 820,000 ldt• 2018: abt 158 vessels / abt 610,000 ldt• First half of 2019: abt 70 vessels / abt 375,000 ldt

Operating Yards• Currently 20 out 22 registered scrap yards• 3 x EU approved



16www.gmsinc.net

Annual Capacity of all currently approved yards• Maximum recycled: about 795,000 ldt• Theoretical capacity: about 2.6 m ldt

Number of Vessels• Insufficient information (presently 1-2 known

in Turkey)

Operating Yards• 30 EU based yards• 3 yards based in Turkey• 1 yard in USA

- Different fundamentals affecting pricing:

a. Currency b. Steel Valuec. Majority of EU yards mainly

operate as repair/building yards rather than focusing on recycling

Source: EU Journal - COMMISSION IMPLEMENTING DECISION (EU) 2019/995


17

Currently Turkish yards paying USD 200-250 levels (not for compliance with EUSRR), Indian Subcontinent USD 350-400. EU: some in the region of USD 100/tn while others have to be paid for their services.

EU Ship Recycling Regulation: Commercial Implications

www.gmsinc.net

Residual Values FPSO 40k LDT Semi-Sub 20k LDT Jack Up 10k LDT

Indian Subcontinent $ 16,000,000 $ 7,600,000 $ 3,600,000

Turkey $ 9,200,000 (57.5% of the Indian Subcon price)

$ 4,600,000 $ 2,100,000

EU approved Yard $ 4,000,000 (25% of the Indian subcon Value)

$ 2,000,000 $ 1,000,000


18www.gmsinc.net Brazil Offshore Finance Forum

19www.gmsinc.net

Options to satisfy ESG requirements:

ISO Certified yards: Is this still a good industry practice ? Does it meet your ESG requirements? Probably not….

Yards holding SOC with HKC: Class NK, Rina, IRQS, LR - commercial limitations?

Limitation to specific SOC: Class NK – LR? Commercial implications?

Sell “as is” – Don’t ask , Don’t tell

Further Trading deal – TC/BB structure


20www.gmsinc.net

Inaccurate Perception of the Industry


21www.gmsinc.net

a) Understanding of the national and international regulations related to ship recycling

b) Technical expertise in order to identify the level of compliance of the candidate yards

c) Regular auditing of the facilities so that the development is monitored accurately

d) The selling process / ESG policy

e) Proper monitoring and reporting of the recycling process should be taking place in order to ensure proper implementation of the agreed standards while looking into continuous alternatives for further development

f) Awarding the yards which perform better / other yards which were not previously approved should be given the chance to rectify non conformities


22www.gmsinc.net

• GMS’s RSRP (Responsible Ship Recycling Program) operates under the IMO's Hong KongConvention guidelines, which provides for environmentally safe and sound ship recycling, andthe ILO (International Labour Organisation) requirements, which address the requirementsfor the safety of the labor force. Under GMS's RSRP, principals of GMS select a yard of theirchoice (for the recycling of the vessel) that is capable of meeting national and internationalrequirements.

• GMS employs certified IHM Specialists. Once the IHM has been prepared:

• The facility will provide a Ship Recycling Plan (SRP) to GMS who will coordinate all thenecessary procedures to be followed (i.e. marking hazardous zones, extraction, removal,transportation and safe-disposal).

• GMS will monitor the procedures undertaken by the recycling yard and will provide regularlyreports to Sellers, which describe in detail, all the procedures that were followed from thebeginning of recycling of the vessel until the week before a final report is provided at the endof the vessel's recycling procedure.

• At the end of the recycling procedure, a full report for the entire recycling procedure will beprepared.


23www.gmsinc.net

Choosing GMS’s Responsible Ship Recycling Programme can form a critical strand of future-proofing of business against increasing sustainability and CSR standards!

By choosing GMS’s Responsible Ship Recycling Programme you will be at minimum complying with the standards and guidelines of the Hong Kong Convention on a voluntary basis

Choosing Responsible Ship Recycling sends the message that previous practices are no longer socially or environmentally acceptable

Credible environmental commitments

Enhanced CSR credentials

Brand risk management

Free Consultation

How we can assist


24

GMS’ Award-Winning Green Initiatives

Brazil Offshore Finance Forumwww.gmsinc.net

25

Industry Awards

www.gmsinc.net Brazil Offshore Finance Forum

26

Recycling impacts ALL of us (capital providers, ship owners, charterers, ship managers, class societies, newbuilding/repair yards…..): Financial risks, Social risks, Political risks, Headline risks, Intellectual

risks, Personal risks

GET INVOLVED. UNDERSTAND REAL FACTS. BE PROACTIVE ECSA, European Commission, Associations, etc. Support RSR (HKC yards)

Call us for free consultations

Call to ACTION!

Brazil Offshore Finance Forumwww.gmsinc.net

27www.gmsinc.net

Thank you for your attention!E: [email protected]


mailto:[email protected]

understanding esg requirements in determining residual ... a… · • the facility will provide a...

Documents