Half of all ballast water systems manufacturers could be bankrupt within the next five years thanks to the IMO’s delayed implementation of environmental rules. That’s according to the chief executive of Coldharbour Marine, one of the many BWM systems suppliers currently navigating a difficult market that has already seen one major casualty this month.

OceanSaver, the Norwegian manufacturer of US type approved BWM systems, filed for bankruptcy and closed last month after losing an arbitration fight against a supplier over claims of defective parts. It is no coincidence that OceanSaver’s demise came only three months after the IMO capitulated on the enforcement of ballast water rules.

While the BWM regulation came into force last month, the IMO delayed implementation of the treaty on existing vessels until September 2019, to the relief of shipowners but to the frustration of system manufacturers who were hoping to cash in on the spike in demand from owners who need them to meet the regulation’s requirements.

According to Andrew Marshall, chief executive of BWM system manufacturer Coldharbour Marine, OceanSaver will be the first of many casualties in the wake of that decision.

OceanSaver’s fatal flaw was its lack of product differentiation, despite its good quality, Mr Marshall argues. The company was caught in the middle, between more expensive companies with a strong reputation, like Wärtsilä, and much cheaper products that appeal to shipowners’ willingness to spend as little as possible on the investment.

Mr Marshall anticipates that out of the roughly 90 suppliers that exist right now in the market, at least 50% will go under in the next five years. The risk to shipowners in this scenario is not simply one of dealing with a lack of after-sales support. Mr Marshall suggests that more bankruptcies will result in expensive retrofits to previously retrofitted vessels, as a result of a USCG ruling that dictates that if a manufacturer goes bankrupt and the part supplier is not there to claim responsibility for the system, it needs to be replaced.

The IMO delay, however, is not the only obstacle for Coldharbour Marine and its contemporaries. Aside from currently offering a “ridiculous discount” on prices, some manufacturers also have tie-ups with shipyards, putting shipowners in an awkward position.

During an interview with Lloyd’s List, Mr Marshall spoke of a New York-based owner who was interested in installing Coldharbour’s system but was effectively “blackmailed” by a Korean shipyard’s demands; the yard charged extra to install the system, as they had a supply agreement with a different manufacturer. They even charged more when the owner instead asked the tank be left empty so that it could be fitted at a later stage.

Mr Marshall was adamant that no system could provide a 100% kill rate of organisms and questioned how some manufacturers can boast that their system can. Regrowth happens, and its pace depends on the season and voyage, he said, adding that both the IMO and USCG regulations were flawed in that sense.

“The legislation is poorly drafted. The implementation is poorly drafted. The testing. And we are all paying the price for bad behaviour early on,” he said.

USCG challenges overstated

Coldharbour Marine will undergo the USCG test on suezmax tankers in the spring, having already received approval from the UK Maritime and Coast Guard Agency. Approval from the USCG is seen as the golden ticket to success for manufacturers, effectively making their system operational all over the globe.

While common wisdom is that the USCG testing is significantly more challenging than the IMO’s tests, Mr Marshall stressed there was no real difference in the requirements, only in the enforcement, as the US is a lot stricter in the enforcement. Thus far just five systems have secured USCG approval.

By that token, any manufacturer that finds it challenging to cope with the USCG test should never have received IMO approval, according to Mr Marshall.
Mr Marshall bemoaned the replicability of the test, which will cost the company another $3m.