The Impact of the Hong Kong International Convention on Ship Recycling: Key Ratification Differences and ESG Investment Prospects

Adopted in 2009, the Hong Kong International Convention for the Safe and Environmentally Sound Recycling of Ships (HKC) is set to become effective on 26 June 2025, following its ratification by Bangladesh and Liberia in June this year. This long-awaited event is anticipated to bring about substantial changes in ship recycling practices worldwide. 

Marine & Offshore Principal Consultant Kevan O’Neill delves into what ratification means for ship owners, highlighting the key differences between EU and Hong Kong ratification and how IHM facilitates positive asset value prospects for ESG-conscious investors.

In response to the urgent need for a globally applicable instrument to address ship recycling facilities, the International Maritime Organisation (IMO) embarked on developing a legally binding solution. This led to the adoption of "The Hong Kong International Convention for the Safe and Environmentally Sound Recycling of Ships" (HKC) in 2009. Since the acceptance to ratify by Bangladesh and Liberia, the  15 States, representing 40 per cent of world merchant shipping by gross tonnage, combined maximum annual ship recycling volume not less than 3 per cent of their combined tonnage, the HKC will come into force on 26 June 2025, following a 24-month period after the ratification acceptance.

The EU's Response and the EU Ship Recycling Regulation

Due to the lengthy ratification process of the HKC, the European Union (EU) took action by implementing the EU Ship Recycling Regulation (EU SRR), which became effective on 30 December 2013 and has been fully applicable since 31 December 2020, with a granted extension of 6 months to 30th June 2021 due to the COVID-10 pandemic. The EU SRR incorporates the requirements of the HKC, along with additional criteria. Although the EU SRR applies regionally, it has helped prepare the industry for compliance with HKC standards.

Key Requirements of the HKC

The main requirements of the HKC can be summarised as follows:

• Ships with a gross tonnage (GT) of 500 and above must possess a certified Inventory of Hazardous Materials (IHM).
• Ship Recycling Facilities (SRF) must be authorised by their respective competent authorities and may only accept ships that comply with HKC requirements.

Impact on Newbuilds and Ships in Service

All ships with a GT of 500 or more must have a certified IHM on board. With the implementation of the EU SRR, most shipyards already offer IHM preparation for new builds, reducing the additional impact of the HKC. Ships in service are required to comply with this regulation by 26 June 2030 or prior to recycling, if earlier. It is estimated that approximately 53,000 vessels fall within the scope of the HKC, and around 30,000 vessels already have an IHM certificate or a Statement of Compliance due to the EU SRR. However, around 23,000 vessels still need to obtain a certified IHM in the coming years. As the HKC comes into effect, the maintenance of the IHM will become crucial, as Port State Control worldwide is expected to prioritise IHM inspections.

Global Impact on Ship Recycling Practices

According to BIMCO, around 15,000 ships will require recycling over the next decade, averaging at approximately 1,500 ships per year. This is anticipated to significantly impact Ship Recycling Facilities (SRF). Each party to the HKC is responsible for establishing a mechanism to authorise SRFs, ensuring their compliance with the convention. This authorisation, known as a Document of Authorisation Ship Recycling (DASR), is valid for a maximum of five years. Authorised SRFs may only accept ships that adhere to the HKC requirements and fall within their authorised scope.

Each SRF must develop a Ship Recycling Facility Plan (SRFP) that includes measures to implement HKC requirements, such as:

• Policies to ensure safety and environmental protection
• Training programs for safe and environmentally sound operations
• Emergency preparedness and response plans
• Record-keeping systems
• Systems for reporting emissions, accidents, incidents, occupational diseases, and other adverse effects on worker safety and the environment

Ship owners, managers, shipyards, and ship recycling facilities are advised to familiarise themselves with the compliance requirements of the HKC. In the coming period, DNV (Det Norske Veritas) will issue further guidance to assist in preparing for the implementation of the HKC.

What should be included in an IHM?

For a complete, valid IHM, your IHM process should include:

• Collation of necessary information
• Visual Sampling Check Plan (VSCP) - assessment of vessel information.
• Onboard verification and sampling survey - validates the information within the VSCP and with verification  through sampling
• Sample Analysis at an accredited laboratory
• Interpretation of analysis results and IHM Report delivery (in Classification specific format, where required)

The IHM consists of 3 parts:

1. Initial IHM survey - required for both new or existing ships to assess the current hazardous materials used on the ships structure, equipment and systems
2. Monitor and record the hazardous wastes generated during ships operations
3. Assess the stores

Part 2 and 3 of the IHM are only required when a vessel is being recycled.

What hazardous materials should be assessed in the IHM?

The main materials that the IHM survey covers:

• Asbestos - a lethal carcinogenic substance that causes a range of asbestos diseases in humans, used in multiple shipbuilding materials before being banned in January 2011 under SOLAS, although there is speculation that the 
• Polychlorinated biphenyl (PCB) - an environmental pollutant, toxic to marine environments, and a lethal carcinogen in animals and humans, banned in the US and Europe
• Polychlorinated terphenyls (PCT) - a toxic material with similar properties to PCBs (often found to contain PCBs) 
• Tributyltin (TBT) - a toxic pollutant, lethal to marine life, previously used in bottom hull paints
• Ozone Depleting Substances (ODS) - man-made gasses that affect the integrity of the ozone layer
• Polybrominated Biphenyls (PBB) - a material generally used as a flame retardant that can enter into the food chain (through aquatic pollution affecting marine life) and resists natural degradation
• Lead paint - Many boats have been painted with high-content lead paint. When this paint deteriorates can be a potential risk to humans and cause lead paint poisoning

What is a valid and certified IHM certificate?

Once the IHM report is completed and delivered to a Recognised Organisation, a valid and certified IHM certificate is issued by, in most cases, the Classification Society or the Ship Registry. A valid certificate will only be issued after the successful completion of the IHM survey. The IHM certificate will be valid for 5 years from the issue date. After this date, shipowners are required to procure a new IHM certificate with a renewal IHM survey, ensuring all records and hazardous materials listed are correct and up to date.

EU/EEA flagged ships must obtain a certified IHM before December 31st 2020. For non-EU flagged vessels visiting EU ports, vessels will be required to obtain an EU SRR IHM Statement of Compliance (SoC) (issued by an authorised Recognized Organization). However, due to changes in trade routes and for ease, it is recommended that all vessels, regardless of their flag, acquire a fully certified IHM prior to the deadline to avoid delays when reaching ports or anchorage.

The IHM survey must be conducted by a trained and suitably competent HazMat Expert and the sample analysis should be conducted by an accredited laboratory. The full IHM should be supplied by a qualified supplier with Classification Society approval, to ensure the IHM is accurate and avoids unnecessary potential risks to both individuals and the environment.

What are the benefits of the IHM?

Aside from the benefits of protecting your company’s reputation, protecting the environment and individuals who may come into contact with poorly recycled vessels, having a valid and certified IHM minimises risks and liability to you. 

The impact of poor ship recycling decisions has been heavily documented over recent years. To combat this negative impact on individuals and the environment, the European Union adopted the Hong Kong Convention 2009 early (in 2013) which outlines requirements that ships flying the flag of Member States of the Union and recycling facilities within the EU have to fulfil in order to make sure that ship recycling takes place in an environmentally sound and safe manner.

For investors and owners, mitigating hazardous material and environmental risk is added value. By going beyond the immediate costs of managing or remediating hazardous substances and implementing effective EHS (Environment, Health, and Safety) systems, you can add significant value to your vessel(s). These assets serve as investment vehicles that naturally degrade and devalue over time. However, by implementing a robust EHS and Hazardous Materials program, you can mitigate this degradation and potentially save millions when divesting your assets.

Our Purpose: Protecting People and the Environment

At Lucion Group, we are driven by a purpose — to protect individuals from hazardous environments and safeguard the environment from the impacts of human activity. As a dedicated company, we offer a comprehensive range of ESG (Environmental, Social, and Governance) advisory services. Our expertise includes materiality assessments, ESG benchmark assessments, and the development of Sustainability Strategies and ESG Action Plans.

Moreover, we provide specific advice and consultancy support tailored to your needs. Our services encompass environmental risk management, inspection, assessment, and advisory services through our extensive network of companies across the globe.

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With over 600 employees operating across 12 sectors, including marine vessels, maritime infrastructure, and offshore, we are committed to maintaining exceptional quality. Our QHSE (Quality, Health, Safety, and Environment) business management systems are accredited to ISO 9001, ISO 14001, and ISO 45001. At Lucion Group, our mission is to proactively prevent occupational and environmental risks and protect individuals whenever possible.

We think globally, but we deliver locally. As a member of the Inogen® Alliance, we have a strong global footprint. Our experienced Hazardous Material Surveyors service clients in a variety of worldwide locations, from Canada and Brazil to Nigeria and the North Sea. We understand the vital importance of cooperation among clients, contractors, and stakeholders to avoid conflicts, meet deadlines, and ensure the safe delivery of projects.

Trusted by Leading Marine Industry Players

Lucion has been serving the global marine industry since 2002, earning the trust of numerous clients, including DFDS, P&O Ferries, Norwegian Cruise Lines, Lauritzen KOSAN, TORM, Irish Mainport Holdings and Burgess Yachts, covering a wide variety of vessel and asset types. From comprehensive surveys, identification, and management to asset recycling, dismantling, and disposal consultancy, Lucion provides end-to-end solutions to ensure compliance with SOLAS, the Hong Kong Convention, and the EU Ship Recycling Regulations.

We hold approval status with major IACS Classification Societies such as Lloyds Register, Bureau Veritas, and the American Bureau of Shipping (ABS). Additionally, we have a team of directly employed Marine HazMat Experts certified by DNV GL. Our skilled technical and scientific teams operate across various sectors, delivering swift and responsive support to our clients. We approach each project with meticulous risk management, ensuring effective and cost-efficient solutions.

Get in touch with our team today to start reducing risk while achieving sustainable growth. We are here to support you in making informed decisions and protecting your investments. Together, we can ensure a safer and more sustainable future.

About the Author

Kevan O’Neill is a specialist in hazardous materials management in the marine sector, working with clients such as UK Ministry of Defence, Repsol Sinopec Resources, Shell, Well-Safe Solutions, Helix Energy, Petrofac, SBM Offshore, BW Offshore, Vroon Offshore, Maersk, covering a wide variety of vessel and asset types. 

Leading teams of surveyors and analysts to deliver inventory of hazardous material (IHM) surveys and remediation and ship recycling plans (SRPs) in locations across the world. 

As Marine Services Director, Kevan uses his expertise to support clients in managing hazardous materials on vessel fleets, ships and offshore platforms and maintaining compliance with Safety of Life at Sea (SOLAS), the Hong Kong Convention and the EU Ship Recycling Regulations. Kevan is an approved Senior Expert working on behalf of the European Commission in the review, audit and approval process of ship recycling facilities that are situated outside of the European, Union and who wish to appear on the ‘European List’ of approved recycling facilities.  

Kevan, who holds a BOHS Certificate of Competence in Asbestos, and is also an Associate Member of the Royal Institution of Naval Architects (AssocRINA), has developed a wealth of practical experience in managing hazardous materials for clients in the marine, construction, utilities and oil & gas sectors and in 2014 he became a Principal Consultant for Lucion’s Marine & Offshore division.

Kevan O’Neill

Marine & Offshore Principal Consultant

E: kevan.oneill@lucionservices.com

T: +44(0)345 5040 303

M: +44(0)756 8106 393

Linkedin: Kevan O’Neill