A Q&A with International Salvage Union President Richard Janssen

Written by Heather Ervin
Richard Janssen

Richard Janssen

Though spectacular salvage and wreck removal projects continue to hit the headlines, the ocean salvage industry continues to face pressures that has seen some major players leave the market in recent years.

We asked Smit Salvage Managing Director Richard Janssen, who is president of the International Salvage Union, to give us some insights into the state of industry.

Marine Log (ML): The two salvage cases that have been most in the headlines in the past year have been wreck removal cases – the Wakashio in Mauritius and the Golden Ray in the U.S. What percentage of the salvage industry’s business has wreck removal accounted for in recent years? And how much has been accounted for by emergency response?

Richard Janssen (RJ): The International Salvage Union’s statistics show that the trend has been for wreck removal income to increase as a proportion of the overall income for ISU members. It now accounts for approximately 50% of income. In 2019 (latest figures), for example, 101 wreck operations were reported with a gross income of US$ 284 million—59% of total income, which was US$ 482million. It means that other sources of income—largely emergency response work—produced US$ 198 million. 

The International Group of P&I Clubs’ (IG) analysis of the cost of wreck removals established that the location of the wreck and the requirements of the authorities are the key drivers of cost. There have been a small number of notable, complex, and costly cases but these are not the norm. The 2019 ISU statistics indicate an average of US $2.8 million gross income per wreck removal service. The scale and cost of Golden Ray and Wakashio are outliers.

ML: To an outside observer, the salvage industry would seem to be shrinking—with Ardent being one of the latest names to disappear. Is there now a danger of under-capacity in the worldwide industry?

RJ: The salvage industry continues to face economic pressure. The demise of Ardent means that over just a few years, companies like Titan, Svitzer, and Mammoet have all been lost to the industry. I believe that it remains an open question whether the capacity of the industry is satisfactory and whether its capability is aligned with the risks run by underwriters. It is essential that professional salvage service remain available globally.

ML: Salvage operations often seem to involve the deployment of assets from a number of players. Are there any statistics on the size of the industry in terms of numbers of salvage tugs available?

RJ: ISU does not keep statistics on the number of salvage tugs available. But it is now uncommon for salvage companies to keep salvage tugs “on station” at strategic locations. Many ISU members have their own vessels but the economics of the industry means that they are often used in diversified tasks such as ocean towage and harbor or terminal towage as well as for salvage. It is not unusual for salvors to cooperate and use each other’s vessels and equipment in the provision of services and for suitable craft and equipment to be chartered for specific jobs.

ML: What vessel types are most often in need of salvage assistance? There seem to be increasing incidents of containership fires and losses of containers overboard?

RJ: Generally, and this is likely due to how this vessel type is represented in the world fleet, general cargo vessels and bulk carriers are the vessel types most often in need of salvage assistance with propulsion failure or grounding being the most common casualty situations.

Containership fires are a concern to the ISU and also to the insurance industry and, anecdotally, they seem to be increasing but ISU does not keep statistics on the class of vessels to which its members provide services. The increase in container trade and the increase in the size of boxships over the past 15 years have been well noted. Containerships present particular challenges to salvors but there are many examples of ISU members successfully reducing losses of both containerised cargo and containerships when they have been casualties. 

ML: The revenues for the industry reported in ISU statistics (2019 gross revenue for ISU members was US$ 482 million) seem low in comparison with vessel values. Does this indicate that salvors work on tight margins?

RJ: Well, competition between providers, increased operating costs, and reductions in the number of cases have combined to create a difficult economic climate for salvors. The reference to vessel values is only relevant for a particular type of salvage contract, the Lloyds Open Form, and other contracts are characterized by a time and material basis.

The rewards are governed by the type of contract that the service is provided under and consequently the level of financial risk that the contractor is taking. The salvor will assess numerous variables including the state of the vessel and its potential salved value (ship and cargo), the weather location, and so on. Increasingly contractors operate on commercial terms rather than the traditional “no cure, no pay” basis.

Awards for work done on a “no cure, no pay” basis are judged on a number of criteria including the salved value of the vessel and cargo and the dangers that they and the salvor were exposed to. The values associated with some maritime adventures are now vast, but there is an established legal principle in “no cure, no fee” cases that the salvage award should be fixed with a view to encouraging salvage operations but should not be disproportionately large.

ML: Could you say something about initiatives the ISU is involved in with BIMCO to come up with a new standardized wreck removal contract?

RJ: The standard BIMCO wreck removal contracts (WRECKFIXED, WRECKHIRE, WRECKSTAGE) were last updated a decade ago and the contractors, shipowners and insurers agreed that they needed to be revised. ISU is therefore working cooperatively with the IG and others to update these BIMCO contacts and to consider how best to assess and apportion risk fairly in wreck removal work. The two associations are also working to revise their Code of Practice regarding the tendering process for wreck removal contracts. The work is at an early stage and is not expected to be concluded until 2022.

ML: Could you say something about Lloyd’s Open Form (LOF) contracts? These seem to be falling from favor. What are the dangers in this? Also, what sorts of contracts are being entered into place of them?

The decline in the use of Lloyd’s Open Form has been well documented in the past decade and there are various explanations for that. ISU is clear that LOF remains the best contract for many emergency response situations and promotes its use. LOF facilitates rapid intervention in a casualty situation and time is often critical in the early stages of an incident.

Quick action by a professional salvor can prevent a casualty becoming an expensive catastrophe with environmental damage. Alternative contracts include the BIMCO towage contacts, commercial terms and variants of marine services contracts. These all need to be negotiated before action can be taken which can cause critical delay and contrary to an LOF require the shipowner to prefund the entire operation.   

ML: What can shipowners—and their insurers—do to ensure that when something goes wrong there will be a salvor available to help?

RJ: A realistically funded salvage industry with the equipment and expertise to prevent marine disasters is essential for shipowners, insurers, and wider society. Insurers and salvors need to work cooperatively together because they serve the same client, the shipowner.

Environmental protection is arguably the most important factor in political and industrial decision-making. ISU members have a proud record of preventing environmental damage. For example, the ISU’s pollution prevention survey statistics from 2019 (latest figures) show that its members provided services to vessels carrying 2.3 million tonnes of potential pollutants. It is a vital service for shipowners and their insurers in addition to prevention of loss of property.   

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