Responsible ship recycling initiative welcomes SEB

Swedish financial services group SEB has joined the Responsible Ship Recycling Standards (RSRS), a joint bank initiative for ensuring environmentally and socially responsible dismantling and recycling of ships.

 “We want to increase awareness of the environmental and social risks associated with recycling of ships. By joining RSRS we want to demonstrate that we are dedicated to promoting responsible handling of ships throughout their lifetime,” Hans Christian Kjelsrud, Global Head of Shipping Coverage at SEB, commented.

SEB becomes the twelfth member of the initiative which was started by a group of European banks active within shipping back in 2017.

“Scandinavian banks have traditionally been strong within ship financing and by joining together we achieve greater leverage to work towards better sustainability standards in the global shipping industry,” he said.

RSRS is aligned with the 2010 Hong Kong Convention. This convention, which is still to be formally ratified, establishes a minimum standard for recycling of ships. In addition, the EU has formulated further requirements that apply to all vessels sailing under one of the EU Member States’ flags.

The other banks that are part of the RSRS initiative are ABN AMRO, Danske Bank, DNB, Eksportkreditt, Hamburg Commercial Bank, ING, KfW IPEX-Bank, NIBC, Nordea, Sparebank SR-Bank and Sparebanken Vest.

SEB previously signed the Poseidon Principles, a global bank initiative to reduce the emission of greenhouse gases from shipping. The principles are consistent with the International Maritime Organisation’s (IMO) ambition that by 2050 carbon dioxide emissions from shipping shall be reduced by 50% compared with the base year 2008.

The shipping industry has had a tough decade in the wake of the economic downturn during the financial crisis. This was preceded by a strong expansion phase at the beginning of the 21st century when China joined the World Trade Organisation and started to import raw materials, take over manufacturing industries and export cheap consumer products to the West.

“Then what often happens in good times occurred, namely that industry participants rushed to the yards and ordered new ships in the belief that the good times would last for ever. Then the financial crisis hit, and the industry went into recession with an enormous surplus of new ships to be delivered. Since then, with a few exceptions, there has been a surplus of vessels over the past ten years which has put pressure on freight rates,” Kjelsrud added.

Now, the orderbooks for new ships are at a historic low and there is for the most part a balance between supply and demand for vessels.

With few new vessels coming onto the market at the same time as the economy is recovering from the corona crisis, the industry should experience a relatively positive market over the next two years, according to SEB.

The big challenge going forward is the transition that is needed to achieve the ambition to halve the emissions of greenhouse gases by 2050 compared with the base year 2008.

“This must happen at the same time as sea transports are increasing which with unchanged technology would lead to an increase of up to 50% by 2050,” Kjelsrud further said.

Currently there is considerable uncertainty about how the ships of the future will be powered to achieve these emission targets.

“Will it be wind, LNG, hydrogen or ammonia? Is it possible to navigate in new ways where you take into account weather systems or find new triangular routes to avoid ships having to sail empty when they have unloaded? This is the big question for the industry and it naturally means that the owners are careful and waiting before ordering new vessels,” Hans-Christian Kjelsrud concluded.