Ballast water treatment market. Opportunities for technologies in the light of regulation changes

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1 Analysts report Ballast water treatment market Opportunities for technologies in the light of regulation changes Executive summary Current status: surging market are the primary driver behind the ballast water treatment market, as the role that ballast water discharge plays in the transfer of invasive species to new marine environments has become hard to ignore. The IMO Ballast Water Management Convention was adopted in 2004 to address this issue at an international scale, and is finally approaching the target shipping capacity it requires for ratification. Once this Convention has entered into force 12 months after ratification, it will be mandatory for all vessels above 400 gt to install ballast water treatment systems (BWTS). However, an arguably more influential regulation is the Final Rule of the United States Coast Guard (USCG) which was introduced in 2012 to address invasive species in US and Canadian waters. As these waters are highly important in terms of global shipping activity, BWTS that conform to their more stringent regulations are the most sought after by ship owners. As of yet, no BWTS has achieved USCG type approval. Due to there has been limited activity in BWTS investment. Installations that have taken place have subsequently been mainly ship owners prepare for. Expected annual installations of BWTS after IMO ratification in 2015, 2016 or 2017 No. of BWTS Source: ratification 2016 ratification 2017 ratification i

2 2. Regulations With increased awareness of the role that ballast water discharge plays in the transfer of non-native aquatic species across the globe, there have been efforts from the industry to recognise the importance of ballast water management, with two major legal regulations at the forefront of addressing this issue: International Maritime Organisation s (IMO) International Convention for the Control and Management of Ships Ballast Water and Management: This is known as the Ballast Water Management (BWM) Convention and targets the entire global merchant shipping industry. US law: Implemented by the United States Coast Guard (USCG) and the Environmental Protection Agency (EPA), there are distinct laws that apply to vessels that sail in US and Canadian waters. Although these regulations are a significant step in preventing damage to aquatic ecosystems, particularly in terms of the interlinkage between and, has caused great uncertainty in the industry. At present, the IMO convention has not yet been fully enforced, and it has remained that way for the past 10 years despite imminent ratification being continuously anticipated, but subsequently not achieved. This, together with, has caused uncertainty among many ship owners as to the actions they should take regarding ballast water management, as well as the timing of when these actions should take place. Due to these drawbacks associated with the IMO convention, it is the more recent creation of US laws that appears to be. US laws for the approval of BWTS and the methods of testing these systems are much stricter than those IMO enforce for type approval, despite their respective numerical discharge standards for ballast water being identical. However, a major factor is that currently no BWTS has achieved full USCG type approval. Numerous BWTS are currently being tested to USCG standards, however, and as several of the world s core shipping routes necessitate sailing through North American waters, ship owners depend on access to this region for their operations. They are that their vessels legally comply with regulations across the globe. Those vessels which do not have a USCG type approved system onboard when such a system is available face having a. Therefore, although both sets of regulations will have significant influences on the industry when either comes fully into play, it is the that are perceived to be the most important in the industry at present. 2.1 IMO convention IMO s Ballast Water Management Convention was adopted in 2004 as an international structure to address the issues of invasive species through ballast water management. Although the Convention has been adopted, it has not yet been enforced. In order for this to occur, it needs to be ratified by 30 or more countries which represent 35% of the world s merchant shipping tonnage. As of February 2015, has been reached by. As it has taken over ten years to reach its current stage, within which time numerous previous estimates of ratification have been made but not achieved, it is not clear when the remaining tonnage will be fulfilled, although some are hopeful this may occur by the end of Once ratified, the Convention will take 12 months to fully enter into force, during which time a surge of investment in BWTS is likely to take place. At present there are IMO type approved BWTS available in the market. The Convention consists of two key standards for ballast water management: the D-1 standard which outlines the requirements of ballast water exchange, and the D-2 standard which specifies approved BWTS and acceptable levels of organisms in treated water for discharge. The latter is detailed in the following figure. Figure 2.1 IMO BWM Convention D-2 Standard Organism Standard Plankton >50 μm in minimum dimensions <10 cells/m³ Plankton μm <10 cells/ml Toxicogenic Vibrio cholera (O1 and O139) <1 cfu/100ml or less than 1cfu/g (wet weight) Escherichia coli <250 cfu/100ml Intestinal Enterococci <100 cfu/100ml Source: IMO 4

3 2014 and discharge, water stripped from the tank must also be routed through the BWTS prior to discharge to prevent contamination from the water that was remaining within the tank, and fully comply with IMO s D-2 standard. The challenge is being able to configure a BWTS installation in such a way that this can occur, while minimising damage to the treatment system by sediment and particles that may be present within the drive water. Corrosion of tank coatings: Some types of ballast water treatment, particularly those which contain oxidising agents, can have corrosive impacts on the protective coatings of ballast tanks which can damage a vessel s hull. Ship owners need to ensure that the BWTS they select is compatible with the coating in their tanks, otherwise the vessel will need to be dry-docked for repair when the coating fails. 3.2 Current BWTS on the market At present, there are approved BWTS available on the market. Due to the high variability in the requirements of a BWTS, which differ according to the particular vessel on which it is to be installed, there is not one single solution applicable for all. As a result, many different types of BWTS have been developed. Figure 3.1 IMO type approved and AMS accepted ballast water treatment systems Category IMO type approved USCG AMS accepted No. of BWTS No. of BWTS treating on ballasting & de-ballasting No. of BWTS using active substances No. of BWTS suppliers Note: An updated list of IMO type approvals will be available in May 2015, following MEPC 68. Systems that have G9 Basic and Final approval but not full type approval have not been included. Source: These systems predominantly comprise two major treatment stages: solid-liquid separation and disinfection, as shown in the following figure. Figure 3.2 Ballast water treatment train Residual control/ chemical reduction Solid-liquid Chemical separation disinfection Physical enhancement BALLAST WATER TREATMENT SYSTEM Chemical Physical enhancement disinfection Key: Optional enhancing treatment Source: Adapted from Lloyd s Register Group Ltd, STAGE 1 STAGE 2 10

4 Company BWTS name Technology Filtration + Electrochlorination IMO type approval date AMS accepted date Treatment capacity (m³/hr) 450 9,500 No. of installations Originating from is a major player in water disinfection. It entered the ballast water treatment market on the basis of its technology s long-term presence in offshore applications. The uses a slip-stream approach, and is active in both the newbuild and retrofit markets, particularly in Europe and the Americas Advanced oxidation Advanced oxidation processes refer to a range of treatments that oxidise organic impurities in water through rapid reactions with hydroxyl radicals. There are a variety of advanced oxidation treatments, most often consisting of and/or. However, and can also be classified as advanced oxidation processes. The types of advanced oxidation processes and number of systems that utilise them are shown in the following figure. Figure 3.5 Advanced oxidation types used in BWTS Source: No. of advanced oxidation types used An advantage of this technology is that it can be chemical-free, depending on which specific process is employed. However, it often necessitates high cost, either from its high consumption of power in cases where chemicals are not used, or from the cost of chemicals when they are needed. Important players in the market whose BWTS are based on advanced oxidation are shown below. Company BWTS name Technology Filtration + UV + Catalytic Oxidation IMO type approval date AMS accepted date Treatment capacity (m³/hr) 6000 * Data obtained from Clarkson Research World Fleet Register data may not accurately reflect current state. No. of installations Ballast water is a key element of environmental protection solutions, with other forms such as airborne emissions and bilge water solutions also on offer. Since its first entered the market, the system has undergone various developments in line with industrial needs; its third generation model is 50% smaller than previous versions to help meet the space restraints especially impacting retrofits, and also consumes 60% less energy. 15

5 4. Market analysis 4.1 Market overview Installations currently dominate the BWTS market. Delays in the IMO convention ratification have limited the demand and urgency for installations, particularly in relation to the more difficult and expensive retrofits. Currently, there are, the majority of which use as shown in the following figure. Figure 4.1 Number of BWTS installations by technology type BWTS installed Note: Category other includes BWTS installations with unknown technology Source: World Fleet Register, Clarkson Research, The largest proportion of BWTS are currently installed on. These classes of ship carry most of the world s marine trade, and therefore have a greater impact in terms of the transport of non-native invasive species. in the form of account for of all installations, whilst account for, as shown in the following figure. Figure 4.2 Number of BWTS installations by ship type BWTS installed Source: World Fleet Register, Clarkson Research, In terms of ships categorised by the size of their ballast tanks (as classified by IMO in their convention compliance schedule), the highest number of BWTS are currently installed on those, i.e. those with ballast tanks of. of these ships have been equipped with BWTS that involve (as shown in figure 4.4). This illustrates the disparity between the size of ship ballast tanks and the capacity of ballast water pumps. A ship with large ballast tanks may not necessarily need to rapidly take in and discharge water, so smaller pumps are sufficient. This means that technologies which are more efficient at smaller capacities, such as Note: This chapter utilises data from the Clarkson Research World Fleet Register in relation to the global fleet and ballast water treatment system (BWTS) installations. The latest installations might not be captured in the database. 19

6 The following figure summarises our forecast for capital expenditure on ballast water treatment by technology. Figure 4.13 Capital expenditure on BWTS by technology, $ million Technology ($m) Total Source: We expect that will represent the majority of spending in this market, reflecting both the number of treatment systems required for each ship and the comparatively high capacity of the treatment systems installed. Spending on ballast water treatment for ships will peak in at around. As these ships make up most of the global fleet, we expect that installations on these ships will dominate the market immediately after ratification

7 The following figure summarises our forecast for capital expenditure on ballast water treatment by ship type. Figure 4.14 Capital expenditure on BWTS by ship type, $ million Ship type ($m) Total Source: We also present a forecast for spending on system components, with a particular focus on the technologies used for disinfection and pretreatment. We assigned a percentage of the total spending on each system to the key components in a ballast water treatment system: Pretreatment technologies include backwashing filters, hydrocylones, cavitation, etc. Disinfection technologies include UV lamps and reactors, ozonation systems, chlorine and hypchlorite dosing systems, electrochlorination systems, electrolysis systems, deoxygenation systems, advanced oxidation systems, etc. Other system costs include system piping, valves, general monitoring and electrical systems, systems housing and general fabrication costs