About: Marine Salvage

ISU today published its annual statistics for 2018:

Activity levels sustained but salvage industry continues to experience reduced returns.

• Gross revenue for ISU members – US$ 409 million (2017, US$ 456 million)
• Activity levels – 234 services (2017, 243 services)
• LOF cases up – 55 (2017, 46) and LOF revenue rises to US$ 104 million (2017, US$ 53 million)
• Wreck removal income – US$ 208 million from 71 services (2017 – US$ 264 million from 116 services)
• The industry continues to be active, continues to invest and continues to provide essential services for ship owners and insurers

Commenting of the statistics, ISU President, Ms Charo Coll, said: “The 2018 ISU statistics again show the economic pressures on our industry. In response, ISU and its members, must continue to promote the value that the industry provides to ship owners, insurers and the wider shipping industry and society.

“ISU committed in 2018 to be forward looking and to recognise that its members contract in different ways and deliver many vital services. Their operations help to prevent and mitigate loss; protect the environment and support world trade by keeping goods moving and seaways and ports open.

“There is fierce competition but professional salvors with their own people, equipment and experience bring an expertise to the most difficult jobs giving confidence that the operation will be expertly managed, lives saved, the environment protected and the value of property preserved.”

The total number of “dry” salvage services (emergency response as opposed to wreck removal) in 2018 was 234. Additionally there were 71 “wet” (wreck removal) cases.

The statistics show that the industry’s revenues have dipped from the performance in 2017 and are up on the low point of 2016 but the numbers are still well below the levels of several years ago when annual income was typically more than US$ 700 million.

The statistics show that Lloyd’s Open Form (LOF) continues to be an important contract and in 2018 there were 55 cases for ISU members generating income of US$ 104 million. It compares with 46 cases worth US$ 53 million in 2017. Average income from each LOF case was US$ 1.9 million representing 7.45% of the average LOF salved value.

Revenue from LOF cases represented 58% of all “dry” salvage revenue and LOF cases accounted for 24% of all “dry” salvage cases in 2018.

Total revenues from SCOPIC continue at very low levels at US$ 21.3 million, marginally up on the all-time low of US$ 20 million in 2017.

Revenue in 2018 from operations conducted under contracts other than LOF was US$ 75 million – down from US$ 115 million the previous year. Average revenue from non-LOF contracts was therefore US$ 419,000 per case.

Wreck removal income has grown during the past decade and remains an important source of income for members of the ISU. In 2018, 71 operations produced income of US$ 208 million – 51% of total income.

The ISU statistics are collected confidentially from all ISU members, aggregated and analysed by a third party. The statistics provide the only published measure of the state of the marine salvage industry. They do not include the revenues of non-ISU members. The statistics are for income received in the relevant year but that can include revenue from services provided in previous years which introduces an element of “lag”. The statistics are for gross revenues from which all of the salvors’ costs must be met.

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Members of the International Salvage Union (ISU) provided 224 services to vessels carrying 3,213,228 tonnes of potentially polluting cargo and fuel during operations in 2018 demonstrating the importance of ISU members’ role in protecting the marine environment.

There was a significant increase in 2018 of vessels carrying crude oil and refined oil products 1,302,988 tonnes – up from 933,198 tonnes in 2017. The 2018 numbers also reveal a large increase in the number of containers involved in salvage cases, rising from 45,655 TEU in 2017 to 59,874 TEU in 2018.

Bulk cargoes declined to 743,100 tonnes in 2018. This category includes products such as coal, scrap steel, grains, soya and cement. A number of bulk cargoes are not included as potential pollutants and ISU members also provided services to bulkers carrying 497,973 tonnes of non-hazardous dry bulk – mainly metal ores.

The data come from the results of the ISU’s 2018 Pollution Prevention Survey. The survey was re-based in 2014 to include a wider range of potential pollutants including containers and hazardous and dirty bulk cargoes.

Bunker fuel, at 111,796 tonnes in 2018, was down from 135,995 tonnes the previous year. A number of services noted within the total did not record the quantity of bunkers on the vessel or the cargo type.

Reacting to the results of the survey, President of the ISU, Charo Coll, said: “ISU wants to make sure that it promotes the full benefits that the salvage industry provides. Of course we aim to save life, to save property and mitigate loss but our members’ operations also protect the environment from great harm.

 “We know that not all of these potential pollutants were at risk of going into the sea. Some cases will have been simple with limited peril but many others will have carried a real danger of substantial environmental damage. One major incident can cause an environmental catastrophe with huge financial and reputational consequences.

“It is essential that there continues to be global provision of professional salvage services to respond professionally to maritime emergencies and that needs appropriate compensation.”   

2018 ISU Pollution Prevention Survey Results (tonnes)

In the period 1994 to end-2018, ISU members have provided services to casualty vessels carrying 31,419,604 tonnes of potential pollutants, an average of more than one million tonnes per year.

Of the 224 services provided by ISU members in 2018, variants of wreck removal contracts were used in 26 services; Lloyd’s Open Form – 33 services (in total, Lloyd’s recorded 53 LOFs in 2018. That number includes LOFs performed by non-ISU members and there may be some under reporting in the ISU survey). Towage contracts accounted for 61 services; Japanese Form – 38 services; Fixed Price – 4 services; Day Rate – 33 services and other contracts were used in 29 services.

The survey was first conducted by ISU in 1994 and the methodology was updated in 2014. It now recognises that coastal state authorities consider most cargoes to be potentially polluting. Container trade has also increased dramatically and the capacity of containerships is now far greater than in 1994. Containers, with mixed and sometimes hazardous contents – and the danger they cause if left in the sea – are both a potential pollutant and hazard.

The survey takes account of the International Convention on the Prevention of Pollution from Ships (MARPOL), the International Maritime Dangerous Goods Code (IMDG Code), Intercargo guidance, P&I Club guidance; International Tanker Owners Pollution Federation publications and the International Solid Bulk Cargoes Code.

The Annual General Meeting of the International Salvage Union was held today in Cape Town, South Africa. At the meeting, members of the ISU, the global trade association for marine salvage contractors, agreed a new vision for the ISU which must be more forward looking and be proud of the significant contribution its members make towards mitigating the impact of marine incidents, preventing loss and facilitating trade.

There is much pressure on the supply side of the salvage industry and ISU welcomes competition but it has led to the use of alternative contracts not intended for emergency situations requiring immediate response. While recognising this, ISU continues to promote unamended Lloyd’s Open Form (LOF) which remains a central part of salvage provision. However, its use has diminished and is unlikely to return to historic levels. It is the view of ISU members that traditional salvage services provided on a “no-cure no-pay” basis using the LOF contract cannot, alone, properly sustain a salvage business in today’s market.

At the meeting, ISU members were briefed about a new suggestion, the so-called “LOFlight” contract, and agreed that ISU would not support it.

ISU believes that the shipping and insurance industries must – in their own interest – recognize the need to provide sufficient compensation to encourage investment in vessels, equipment, training and the development of highly qualified staff in order to continue to provide an essential global emergency response capability.

At the same time, ISU also recognises that there are pressures on the demand side of the industry. Shipowners have had difficult market conditions for many years and the property insurance sector – particularly the hull market – has suffered as well and ISU will continue to engage with the relevant parties.

President of the ISU, Ms Charo Coll said: “ISU knows well the reality in which its members operate. We don’t want to make radical change but we do want to make sure that the ISU continues to be respected and trusted and that its work reflects the market and modern salvage.

“ISU embraces a diverse approach to contracting and there is much to be positive about: it is just not possible to envisage the shipping business without some provision of salvage, wreck removal and associated activities. There is a need for ISU members’ services and that will continue.”

Many ISU members have diversified but their core services protect the environment; prevent disasters and mitigate risk and loss. They provide high quality project management delivering safe, helpful solutions which facilitate trade and economic growth.

Ms Coll concluded by saying: “We are positive about our contribution to shipping and the wider economy and environment. ISU members bring order to chaos and can be very proud of what they offer. It is our job as the leaders of the ISU to make sure that the increasingly diverse work of the traditional salvor is recognised and valued and that the rewards are sufficient to support the continued availability of professional salvage services in the future.”