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2020 ISU salvage industry statistics show significantly weaker revenues with dramatic fall in wreck removal income and services

ISU today published its annual statistics for 2020:

• Gross revenue for ISU members – US$ 301 million (2019, US$ 482 million)
• 182 services provided (2019, 216 services)
• Lloyd’s Open Form (LOF) – 40 cases (2019, 35). LOF revenue up at US$ 60 million (2019, US$ 49 million)
• Wreck removal income significantly down – US$ 98 million from 52 services (2019, US$ 284 million from 101 services)

ISU President, Richard Janssen, said: “The 2020 ISU statistics show a 38 per cent fall in the income received by our members compared with the previous year. It is the dramatic fall in wreck removal income that stands out in these statistics – a 65 per cent drop. In recent years, wreck removal income has represented roughly 50 per cent of our members’ income but in 2020 it accounted for just under 33 per cent.

“The economic pressures on our industry continue and we know that on an annual basis activity and income for our industry is variable. The general trend towards a smaller number of larger and more complex cases enhances that annual variability.

“There has also been some structural change in the industry in the last 18 months with the loss of a major player. That may have had an impact on these statistics but it is not possible to say for certain or to what extent.

“What we can say with confidence is that ISU members have continued to provide vital services to shipowners and insurers. And, taken alongside the ISU’s pollution
prevention statistics, these numbers still demonstrate an active industry which year-in, year-out provides in the region of 200 services to vessels in trouble.

“Professional salvors protect the environment, reduce risk and mitigate loss. They also keep trade moving – demonstrated so clearly in front of the world’s media with the refloating of the containership Even Given in the Suez Canal this year. But there also has to be a concern about the ongoing provision of salvage services globally and the long term viability of the industry as it is today. ISU continues to actively engage with shipowner and insurers to ensure we are aligned with them on the future challenges they are likely to face.”

The 2019 ISU statistics show that there were 40 Lloyd’s Open Form (LOF) cases for ISU members generating income of US$ 60 million. It compares with 35 cases worth US$ 49 million in 2019. Average income from each LOF case in 2020 was US$ 1.5 million representing 9 per cent of the average LOF salved value of the ship and its cargo.

Revenue from LOF cases amounted to 33 per cent of all “dry” salvage (emergency response) revenue and LOF cases accounted for 22 per cent of all “dry” salvage cases in 2020.
SCOPIC revenue at US$ 24 million was up from US$ 17 million in 2019.

Revenue in 2020 from operations conducted under contracts other than LOF was US$ 119 million, down from US$ 131 million in 2019. The average revenue from each non-LOF contract was therefore US$ 838,000.

Wreck removal has become an increasingly important source of income for members of the ISU but 2020 appears to reverse that trend with US$ 98 million received from 52 services. By contrast, in 2019, 101 operations were reported with a gross income of US$ 284 million.

The ISU statistics are collected from all ISU members by a professional third party, which aggregates and analyses them. The statistics do not include the revenues of non-ISU members but are the only formal measure of the state of the marine salvage industry. The statistics are for income received in the relevant year but that can include revenue relating to services provided in previous years and there can be an element of “time lag”. The statistics are for gross revenues from which all of the salvors’ costs must be met.




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ISU responds to potential closure of Lloyd’s Salvage Arbitration Branch

ISU has submitted its response to Lloyds regarding the possible closure of the Lloyd’s Salvage Arbitration Branch. The following is the full text of the ISU response:

Re: Consultation on proposed closure of Lloyd’s Salvage Arbitration Branch

We are writing in response to the email received from David Lawrence, Lloyd’s Head of Agency, on 23 April in which he notified us of a review which is considering whether the services of the Lloyd’s Salvage Arbitration Branch should be stopped.

It is not clear from Mr Lawrence’s email what the review means specifically for the Lloyd’s Standard Form of Salvage Agreement (Lloyd’s Open Form – LOF) but without the Lloyd’s Salvage Arbitration Branch, and the association with Lloyd’s, LOF will be gravely, if not fatally, damaged.

The International Salvage Union (ISU) is the global trade association representing the interests of organisations which operate as main contractors in marine salvage cases. We have some 50 members and they are individually party to the great majority of the Lloyd’s Open Forms agreed each year. Our members have a proud record of using LOF to save lives, protect the environment and save property.

It is the ISU’s position that to discontinue the support and endorsement of Lloyd’s for Lloyd’s Open Form would have a serious impact on safety at sea and a potentially significant impact on the environment as well as the possibility of catastrophic losses to communities reliant on the sea for their livelihoods. There would be increased danger to seafarers and an inevitable increase in loss of property such as hull, cargo and in businesses affected ashore.

The Lloyd’s Open Form has had a truly global, recognisable identity in the maritime sector for more than 100 years and is the “contract of choice” for emergency response where those at sea face imminent peril. It was designed by the Lloyd’s insurance market specifically for the benefit of the market and its success is based on world-wide understanding and acceptance of it as the “go to” contract.

The marine business of Lloyd’s may have diminished over the years but, at the same time, values of ship, cargo and bunkers – and importantly the complexity of many cases – has increased significantly. Indeed, over the past 10 years, the average total salved values of ISU members’ LOF cases is more than US$1 billion each year. And of course there can also be much greater financial exposure beyond the immediate casualty, as the world saw clearly in the recent case of the containership Ever Given, grounded in the Suez Canal and refloated by an ISU member, which disrupted trade globally.

The ISU has been tireless in its support for Lloyd’s and the use of Lloyd’s Open Form and actively promotes its use. We urge you to continue to provide the services of the Lloyd’s Salvage Arbitration Branch and support for the Lloyd’s Open Form because the entirety of the global shipping emergency response industry is based upon, and relies upon, LOF.
Shipowners, insurers and salvage contractors all agree that the availability of LOF is essential to sustain the provision of the salvage services that prevent and mitigate potentially huge losses and protect the environment. The consequential losses of a major shipping casualty extend far beyond the marine sector. It affects those industries and property ashore that benefit from the coast such as tourism and fisheries and many others in the global supply chain.

Lloyd’s has interests in many sectors beyond marine but without the security and ease of use of Lloyd’s Open Form it is likely that disasters such as the Wakashio will increase and the great benefits of the associated SCOPIC regime will be lost with a return to the use of the Salvage Convention’s Article 14, turning the clock back more than 20 years.
In the absence of LOF there will be a direct impact on insurers and their clients; financial exposure to losses will increase and shipowners and property underwriters will be wide open to common law salvage claims.

We recognise that Lloyd’s must be mindful of costs and that the use of LOF has declined, and we also know that history alone is not a good enough reason to persist with an activity. However, the implications for the shipping industry, coastal states, local and international business and loss prevention go far beyond the place of the LSAB within Lloyd’s.

The association with Lloyd’s – a world scale insurance market and a brand trusted implicitly by all connected with shipping – assures the fairness and integrity of the Lloyd’s Open Form contract and cannot be replaced.

We also believe there are potentially very serious reputational consequences for Lloyd’s which risks being perceived to be abandoning its interest in preventing marine casualty.

The Executive Committee of the International Salvage Union

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ISU statement regarding Ever Given refloating, Suez Canal

This week we have again seen the great benefit provided to shipping and the world economy by professional salvors – members of the International Salvage Union – who are in most cases the only agency with the experience, equipment and people to undertake the kind of job successfully completed by ISU members, Smit Salvage and Nippon Salvage, working together with the Suez Canal Authority.

The case of the Ever Given was particularly visible but the 50 members of the ISU have an excellent track record of dealing successfully with incidents involving all classes of vessel in locations around the world in all kinds of conditions. Statistics recently published by ISU show that in 2020 its members provided nearly 200 salvage services.

Keeping world trade moving is a key part of the salvor’s role, ensuring that all kinds of goods are kept safe and delivered to their destination intact and as soon as possible.

By providing their services, the salvors preserve the value of the goods and prevent or reduce potentially huge losses for the ship and cargo owners’ insurers and re-insurers. In the recent Suez Canal case, the operation had far wider benefit by unblocking this vital trade artery for hundreds of other cargo vessels.

Environmental protection may not have been a critical consideration in the Suez Canal but in many cases it is central to the salvage operation and in 2020 ISU members services involved vessels carrying 2.5 million tonnes of potential pollutants.

The current case clearly demonstrates the value provided to world shipping and society in general by the professional marine salvors and how important it is that a viable marine salvage industry and resources are sustained and kept available worldwide. 

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ISU members provided vital services to vessels carrying 2.5 million tonnes of potential pollutants in 2020

Members of the International Salvage Union (ISU) provided 191 services to vessels carrying 2,538,210 tonnes of potentially polluting cargo and fuel during operations in 2020. It demonstrates the critical role of professional salvors in protecting the marine environment. The data come from the results of the ISU’s Annual Pollution Prevention Survey for operations in 2020.

President of the ISU, Richard Janssen, said: “Governments have talked for many years about zero tolerance for pollution, but society now demands it. Widespread public support for the environmental movement shows that care for the environment is now mainstream and has put it at the heart of political and economic decision making. ISU members have been preventing pollution for decades and we are proud of our great contribution to environmental protection.” 

The 2020 figures show a small increase from 2019’s total of 2.3 million tonnes. One or two VLCCs can have a significant impact on the overall numbers. For example, crude oil in 2020 was 360,733 tonnes, similar to 2019’s 400,000 tonnes while the equivalent in 2018 was 978,000 tonnes.

Cargoes of refined oil products also fell in 2020 to 112,096 – less than half of 2019 figure of 278,046 tones. At the same time, chemical cargoes nearly doubled to 133,150 tonnes in 2020. The number of containers involved in ISU members’ services in 2020 rose to 33,523 TEU up from 25,799 TEU in 2019. The number of containers in cases in 2020 equates to 502,845 tonnes (allowing a nominal 15 tonnes per TEU.)

Bulk cargoes decreased slightly to 744,246 tonnes in 2020. 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 521,326 tonnes of non-hazardous dry bulk – mainly metal ores. Bunker fuel, at 111,886 tonnes stays very similar to the 115,811 tonnes identified in cases in 2019 and remarkably similar to the 111,796 tonnes for 2018.

A number of the services noted in the survey did not record the quantity of bunkers or the cargo type. The survey does not include any of the cases for former ISU member Ardent.

Richard Janssen added: “The numbers, when compared with other years, show the variability of our industry. We are always transparent with the survey – we know that not all of these potential pollutants were at risk of going into the sea. Some cases will have had limited danger but many others will have carried a real risk of substantial environmental damage. Continued global provision of professional salvage services – those offered by members of the ISU – is essential.”   

2020 ISU Pollution Prevention Survey Results (tonnes)

  2020 2019
Number of services 191 214
Bunker fuel 111,886 115,811
Crude oil 360,733 400,000
Refined oil  products 112,096 278,046
Chemicals 133,150 70,944
Bulk polluting/hazardous 744,246 961,061
TEU – tonnes equivalent 502,845 (33,523 TEU@nominal 15 tones/TEU) 386,985 (25,799 TEU@nominal 15 tonnes/TEU)
Other pollutants 51,928 95,909
Totals 2,538,210 2,308,756
Bulk, non-polluting 521,326 229,731

Of the 191 services in 2020, variants of wreck removal/marine services contracts were used in 22 services; Lloyd’s Open Form – 34 services. Towage contracts accounted for 45 services; Japanese Form – 11 services; Fixed Price and Lump Sum – 7 services; Day Rate – 21 services and other contracts were used in 36 services. The Turkish Form was used in 15 services.

The survey was first conducted by ISU in 1994 and the methodology was updated in 2014 to include a wider range of potential pollutants including containers and hazardous and dirty bulk cargoes. 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.

In the period 1994 to end-2020, ISU members have provided services to casualty vessels carrying 36,266,570 tonnes of potential pollutants, an average of 1.4 million tonnes per year.

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ISU President reviews the current state of the salvage industry

Richard Janssen has set out the ISU’s assessment of the current state of the industry, noting its response to Covid-19, the capacity of the industry to respond internationally and the industry’s financial performance.  

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ISU announces new legal adviser

The International Salvage Union’s (ISU) long-standing legal adviser, Rob Wallis, consultant to, and former partner of international law firm, Hill Dickinson, is to retire from the position in early 2021. The Executive Committee of the ISU has selected Richard Gunn, partner of international law firm, Reed Smith LLP, to take on the role.

Commenting on the move, ISU President, Richard Janssen, said: “We thank Rob for his ten years of excellent service to the ISU. He has always been a trusted advisor and has represented the interests of the industry and the members of the ISU extremely diligently and effectively throughout that time and in many different fora. We shall miss his calm, authoritative manner and his vast experience.”

“We are delighted to have secured the services of Richard Gunn to succeed Rob. He is a well-known lawyer in our industry with an impressive track record of handling numerous salvage and wreck cases, sometimes representing salvage contractors and sometimes owners and insurers. We are sure that his broad and practical experience, knowledge of the industry and many well-established relationships across shipping and the law will be of great value to ISU and we are looking forward to working with him.”

The timing of Mr Wallis’ move is to be determined but it is expected that the two will begin their handover towards the end of this year with Mr Gunn taking up the position in the first quarter of 2021.

Mr Gunn is Reed Smith’s global head of marine casualty. He is a qualified master mariner and served in the merchant navy for 12 years before coming ashore to work in shipping operations. He then trained as an English solicitor and qualified in 1996.

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ISU publishes statistics for 2019 – number of services shows slight fall, gross revenues show slight gain

LOF revenue at historic low

ISU today published its annual statistics for 2019:

• Gross revenue for ISU members – US$ 482 million (2018, US$ 409 million)
• Activity levels – 216 services (2018, 234 services)
• Lloyd’s Open Form at very low levels – 35 cases (2018, 55) and LOF revenue at historic low of US$ 49 million (2018, US$ 104 million)
• Wreck removal income – US$ 284 million from 101 services (2018 – US$ 208 million from 71 services)

Commenting of the statistics, ISU President, Richard Janssen, said: “The 2019 ISU statistics are broadly comparable with the previous year. Gross income has rallied somewhat but the numbers are still well below the levels of several years ago when annual income was typically more than US$ 700 million, driven by large scale wreck removals. It shows the economic pressures on our industry but our members have confidence that they provide critical services for shipowners and insurers – protecting the environment, reducing risk, mitigating loss and keeping trade moving. They are however concerned about the sustainability of their businesses and the model on which their services are historically being compensated.

“The market conditions have caused contraction of the industry which has sadly lost some famous names in the past few years. It is essential that there remains global provision of a professional salvage capability so that owners, insurers and wider society can have confidence that marine casualties will be safely and cleanly managed by contractors with the right skills, experience, people and equipment.”

The 2019 ISU statistics show that there were 35 Lloyd’s Open Form (LOF) cases for ISU members generating income of US$ 49 million. It compares with 55 cases worth US$ 104 million in 2018. Average income from each LOF case in 2019 was US$ 1.4 million representing 10% of the average LOF salved value.

Revenue from LOF cases represented 27% of all “dry” salvage (emergency response) revenue and LOF cases accounted for 16% of all “dry” salvage cases in 2019.

SCOPIC revenue at US$ 17 million was the lowest since 2001.

Revenue in 2019 from operations conducted under contracts other than LOF (commercial terms) was US$ 131 million – up from US$ 75 million the previous year. Average revenue from non-LOF contracts was therefore US$ 723,000 per case.

Wreck removal income is a major source of income for members of the ISU. In 2019, 101 operations were reported with a gross income of US$ 284 million – 59% of total income.

The ISU statistics are collected from all ISU members by a professional third party, which aggregates and analyses them. The statistics do not include the revenues of non-ISU members but are the only formal measure of the state of the marine salvage industry. The statistics are for income received in the relevant year but that can include revenue relating to services provided in previous years and therefore there is an element of “lag”. The statistics are for gross revenues from which all of the salvors’ costs must be met.




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ISU members’ vital contribution to environmental protection

Members of the International Salvage Union (ISU) provided 214 services to vessels carrying 2,308,756 tonnes of potentially polluting cargo and fuel during operations in 2019 demonstrating the importance of ISU members’ role in protecting the marine environment. The data come from the results of the ISU’s Annual Pollution Prevention Survey for operations in 2019.

The 2019 figures show a decrease from 2018’s total of 3.2 million tonnes. The decrease is accounted for by the 2018 numbers having an unusually large amount of crude oil. One or two VLCC cases can have a significant impact on the overall numbers. Crude oil in 2019 was 400,000 tonnes the equivalent in 2018 was 978,000 tonnes.

Cargoes of refined oil products also fell in 2019 to 278,046 compared with 324,988 in 2019. The number of containers involved in ISU members’ services in 2019 was also down to 25,799 TEU, the 2018 figure was 59,874 TEU. The number of containers in cases in 2019 equates to 386,985 tonnes (allowing a nominal 15 tonnes per TEU).

Bulk cargoes increased to 961,061 tonnes in 2019. 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 229,731 tonnes of non-hazardous dry bulk – mainly metal ores.

Bunker fuel, remains remarkably consistent at 115,811 tonnes compared with  111,796 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.

Commenting on the results of the survey, President of the ISU, Richard Janssen, said: “ISU members deliver services that save life and property but, as the results of this survey show so clearly, our members’ operations also protect the environment from great harm. The numbers, when compared with other years, also show the variability of our industry.

 “We are always transparent with these numbers – we know that not all of these potential pollutants were at risk of going into the sea. Some cases will have had limited danger but many others will have carried a real risk of substantial environmental damage.

“Attitudes to the natural world have changed dramatically in recent years and the environment is now at the centre of political and business decision making. It is essential that there continues to be global provision of expert salvage services to respond to maritime emergencies and, in most cases, it is only the professional salvors – members of the ISU – who have the experience and equipment to make those interventions and prevent environmental catastrophes.”   

2019 ISU Pollution Prevention Survey Results (tonnes)

  2019 2018
Number of services 214 224
Bunker fuel 115,811 111,796
Crude oil 400,000 978,000
Refined oil  products 278,046 324,988
Chemicals 70,944 127,885
Bulk polluting/hazardous 961,061 743,100
TEU – tonnes equivalent 386,985 (25,799 TEU@nominal 15 tonnes/TEU) 898,110 (59,874 TEU@nominal 15 tonnes/TEU)
Other pollutants 95,909 29,349
Totals 2,308,756 3,213,228

 

Of the 214 services provided by ISU members in 2019, variants of wreck removal contracts were used in 19 services; Lloyd’s Open Form – 28 services (in total, 29 LOFs were reported to Lloyd’s in 2019). Towage contracts accounted for 36 services; Japanese Form – 8 services; Fixed Price and Lump Sum – 12 services; Day Rate – 73 services and other contracts were used in 31 services. The Turkish Form was used in 7 services.

The survey was first conducted by ISU in 1994 and the methodology was updated in 2014 to include a wider range of potential pollutants including containers and hazardous and dirty bulk cargoes. 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.

In the period 1994 to end-2019, ISU members have provided services to casualty vessels carrying 33,728,360 tonnes of potential pollutants, an average of more than one million tonnes per year.

Graphics: ISU Pollution Prevention Survey 2019

ISU’s Annual Pollution Prevention Survey 2019 Percentage Pollutants  ISU’s Annual Pollution Prevention Survey 2019 Pollutants
ISU’s Annual Pollution Prevention Survey 2019 Trends  ISU’s Annual Pollution Prevention Survey 2019 Contracts

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Members of the International Salvage Union respond to Coronavirus

Members of the International Salvage Union have confirmed that they will work hard to maintain full service to their clients during the global Coronavirus outbreak, including providing emergency response services to casualty vessels. It has to be appreciated that the previous destinations of vessels and crew pose an additional challenge when assessing how best to respond to a vessel in distress.

Travel restrictions could affect the way salvors would normally deploy teams but the ISU’s members are spread strategically around the world and larger members have people and equipment in multiple locations and on vessels already at sea.

President of the International Salvage Union, Richard Janssen, said: “Salvors are nothing if not problem solvers and we have a track record of responding to incidents whatever the circumstances. Our priorities are to save live, protect the environment and save property and we will jointly work towards a situation whereby service can be maintained to our shipowner clients during the current difficult times. We are all in competition, but we also work cooperatively together in the service of our clients on many jobs whilst respecting the safety of our teams.”

The ISU has 49 full members providing emergency response, wreck removal, environmental protection and other marine services around the world.

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ISU journalists’ lunch 03 December 2019 remarks by ISU President, Richard Janssen

Instead of using this time to describe the effect on our membership of the operational challenges, the concerning business environment and financial state of the salvage industry, I am going to briefly discuss how the ISU is regarded and how it is responding to the realities of our business environment. 

It follows on from our work last year to “re-position” our industry – to no longer dwell on the past of “tugs on station” and the “pursuit of LOF above other considerations” and simply face the realities of the current environment. Now, what does that mean?

It means that our members are part of the Owners and Underwriter’s risk mitigation chain and that the ISU strives to be credible and trusted. We continue to promote the value of our members who enable world trade by providing services which save life, protect the environment, mitigate risk and reduce loss.

This year we have commissioned research to properly understand how the ISU and the industry is regarded. The survey was international and had more than 100 respondents.

The headline results show that the “overall satisfaction” with ISU was 7.44 out of a maximum score of 10 – we are told by the company that did the survey that this is a good result so I gladly accept that! 

The responses showed that ISU is considered credible and trustworthy; is thought to participate in appropriate forums and that it promotes the industry, has an international outlook and provides networking opportunities.

For the overall perception of the professional salvage industry – as opposed to ISU – the highest scores were for the industry being competent, reliable and safe. I find that very encouraging!

However, there were some lower scores, though still not bad, for professional salvors being trustworthy and providing value for money.

Our interpretation of the results suggests that we need to increase our interaction with owners and insurers about their present and upcoming challenges and how salvors can support them in that. We also must continue our drive to ensure high ethical and operational standards. But then again, it takes two to tango…

Good progress has been made the last six years or so which is reflected in the negotiated agreements and improved working relationship with IUMI, IG and Lloyds.

Part of the re-positioning of the industry is to recognise that many of our members have chosen to diversify and offer other services in addition to their salvage work. But we will keep making the case for the high standards and technical excellence of the professional salvor – the members of ISU.

And so I want to celebrate the investment that the professional salvors continue to make in updating and renewing stockpiles of equipment with a focus on future needs and especially the investment in our people; Divers, Naval Architects, Engineers, Tug Masters and Salvage Masters who are our lifeblood. We train them and nurture them – and we pay them, even when work is short. All of this represents a huge and credible investment and a continued commitment to provide services professionally when and where they are needed.

Helping others to recognise and appreciate the importance of a properly funded salvage sector is the job of the ISU and our focus for the next year.

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