Salvage statistics for 2019 reveal a mixed bag of falls in number of services, a gain in gross revenue and Lloyd’s Open Form revenue at a historic low.

The statistics are contained in the 2019 International Salvage Union (ISU) annual review where its president Richard Janssen reports work continuing to re-position the industry, recognising the challenges and changes on both the demand and supply side.

Looking at the figures, gross revenue for ISU members in 2019 was US$482m compared to US$409 in 2018 with 216 services, down from 234 in 2018. Lloyd’s Open Form (LOF) contracts reduced to 35 from 55 in 2018 translating to a revenue of US$49m compared with US$104m in 2018. Average income from each LOF in 2019 was US$1.4m representing 10% of the average LOF salved value while SCOPIC revenue at US$17m was the lowest since 2001.

Wreck removals are becoming increasingly complex affairs and ‘a major source of income for members of the ISU’ with income increasing from US$208m in 2018 to US$284m in 2019 on the back of 101 services compared to 71 in 2018.

Statistics are collected from all ISU members by a professional third party and do not include revenues of non-ISU members. They only cover income received in the relevant year but may include income relating to services provided in previous years resulting in an element of “lag”.

Commenting of the statistics, Mr 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$700m, 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 industry’s sustainability is important financially for averting loss of property, also from efforts to mitigate risk to the environment not to mention saving lives, something affecting not only the shipping industry but the broader community in general and the report reminds the reader that in 2019 services were carried out to vessels carrying 2,308,756t of potentially polluting cargo.

Market conditions have led to contraction of the industry, some famous names being lost in the past few years and Mr Janssen speaks of the importance of owners, insurers and wider society having ’confidence that marine casualties will be safely and cleanly managed by contractors with the right skills, experience, people and equipment.’

Reductions in LOF services can perhaps be explained by the increase in ‘real-time’ global communications where stakeholders ashore can negotiate contracts independently to casualty and tug masters who in the past had to act on the spot, LOF providing a simple agreement aimed at protecting both parties when speed of response is important.

Commenting on LOF, ISU legal adviser Rob Wallis said: ‘Lloyd’s and others continue with efforts to promote LOF and dispel “myths” about the contract … there continues to be concern about the erosion of the principle of “encouragement” in salvage awards and that salvage capacity internationally might be compromised.’

In past times salvage companies stationed dedicated salvage/rescue tugs globally but many have now divested themselves of these expensive assets, relying instead on chartering tugs locally when required. The important assets however are the skills and experience of the people Mr Janssen speaks of. Smit Salvage as just one example is part of the giant Boskalis empire allowing the sharing of manpower and expertise within an organisation operating globally in a similar marine service industry landscape.

Strategically located salvage equipment stockpiles along with the skilled personnel professional salvors provide are also essential for rapid responses where delay can mean the difference between a successful salvage often attracting little media attention and a disaster, guaranteed to have the completely opposite effect. Only the largest players with deep pockets can maintain this scale of operation and while there are many very capable small scale local operators it is the big salvage concerns who have those extra specialist skills for the large complex and environment threatening casualties that will never go away.

By Peter Barker