SAFE SHIPPING OF IRON ORE FINES An Industry Perspective on Regulatory Process

Presentation by Rio Tinto – Dr P Glazebrook AMSA Workshop Fremantle 27th June 2014

Disclaimer

“The material contained in this presentation is of a general nature only. It is intended to provide commentary and general information. It should not be relied upon as either constituting commercial or legal advice. No warranties of any kind relative to the topics covered, their completeness or accuracy, are given. The views expressed or opinions relayed are those of Rio Tinto, its personnel and/or the presenter and do not constitute an industry consensus or standard.”

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1. Background: IMO and “liable to liquefy” in the IMSBC 2. The IMO Highway: Integration of technical research and

stakeholder engagement

3. Engagement Road – Key Relationships Government Science NGOs 4. Technical Road – Key Outcomes Technical Working Group

• Membership & structure • Approach & methodology • Research outcomes

5. Road Junction – Key Successes

• Technical roadshow • IMO Symposium • DSC 18 Outcomes

6. Road Ahead 7. Summary: Challenges and Successes

the journey

SAFE SHIPPING OF IRON ORE FINES

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Background: International Maritime Organisation

• Inter-government UN Agency of 170 member states (voting rights) and 78 NGO’s with consultative (non-voting) status

• Focus is largely on maritime safety, marine pollution and security under formal conventions

– International Convention for the Safety of Life at Sea (SOLAS), 1960 and 1974

– International Convention for the Prevention of Pollution from Ships (MARPOL73/78)

– International Convention on Standards of Training, Certification and Watch-keeping for Seafarers(1995)

• In addition, IMO has adopted codes which guide formation of national regulations with some codes made mandatory;

– IMDG (2002) International Dangerous Goods Code

– IMSBC (2012) International Solid Bulk Cargoes Code

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Background: “Liable to Liquefy” in the IMSBC

• Group A : “Cargoes which may liquefy if shipped at a moisture content in excess of their TML”

• Group B: “Cargoes which possess a chemical hazard which could give rise to a dangerous situation on a ship”

• Group C: “Cargoes which are neither liable to liquefy (Group A) nor possess a chemical hazard (Group B)

• 2009 : Loss of two Indian vessels with crews carrying iron ore fines raised stakeholder awareness (IMO, CAs and industry)

The IMO Highway IMO Approvals Process for an amendment to the IMSBC Code

Up to and including DSC18

Amendment to the IMSBC Code Relevant to the Safe Carriage of Iron Ore Fines

September 2012 DSC-17 • Circular DSC.1/Circ. 66/Rev. 1 issued as interim measure • Australia, Brazil report research progress • CG given mandate to recommend resolution of the issue to

DSC-18

November 2012 MSC-91 • DSC-18 authorized to issue Circular on Early Implementation

of the draft schedule(s) for Iron Ore fines

June 2013 MSC-92

• Approval of DSC-17 report • Joint Australia/Brazil submission

September 2013 DSC-18 • (1) Agree to amend Annex 22 of IMSBC Code to include new test for TML

• (2) Agree to amend Schedule for IO to include iron ore fines

containing over 35% Goethite, and to draft new schedule for IOF. (Note: (1) and (2) referred to E&T 21 for inclusion n the draft amendment 03-15 of the Code)

• (3) Agree to DSC Circular for Early Implementation of (1) and

(2) above. (Circular to supersede DSC.1/Circ.66/Rev.1)

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The IMO Highway IMO Approvals Process for an amendment to the IMSBC Code

Beyond DSC 18

November 2013 Secretariat

• DSC Circular on Early Implementation Issued DSC.1/Circ.71 Early Implementation permitted

April 2014 E&T 21 • Drafting of amended Annex 2 of IMSBC Code • Drafting of amended IO Schedule and new IOF Schedule

May 2014 MSC-93 • Discussion on the issue (agenda item #9) • Approval of DSC-18 report

September 2014 CCC-1 • Consideration of documents prepared by E&T 21

September 2014 E&T 22 • Finalization of amendments ( if required)

Secretariat • Draft circular letter on amendment 03-15 to the Code

expected for adoption by MSC-95

November 2014 MSC-94 • Discussion of the issue unlikely

May 2015 MSC-95 • Adoption of circular letter on amendment 03-15 to the Code

January 2016

January 2017

Voluntary Implementation of amendment 03-15 to IMSBC Code

Mandatory Implementation of amendment 03-15 to IMSBC Code

(1) and (2) (3)

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IMO Highway : Initial Observations

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• Political influence looms large at IMO

• Potentially up to 5 year process before a Code amendment becomes mandatory

• Committees (and subcommittees) have differing authorities and reporting lines which impact implementation timing

• Verified applied science does find its way into codes to influence the content of proposed amendments but needs to be championed

• Opportunities for the inclusion of verified applied science are too short especially given the need for peer-review of developed science

• Successful influencing is likely to require the optimal integration of stakeholder engagement and sound science

Engagement Road and Key Relationships – AMSA

Rio Tinto has appreciated the opportunity to build links with AMSA since DSC 16 (2011) across a range of activities of common interest including;

• an acceptance of verified applied science as a robust base on which to build safety into maritime regulations

• learnings delivered to industry on mechanisms for both national maritime and IMO regulatory development and approvals processes

• an AMSA open door on current issues (Canberra and London), and as well as for preparations for upcoming IMO meetings (Bulk Cargoes Advisory Group)

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Engagement Road and Key Relationships – AMSA

• AMSA’s acceptance of an industry recommendation to meet with the Brazil Competent Authority (CA) as a precursor for work to develop joint submissions to DSC 18

• AMSA’s acceptance of industry input for consideration in Australia’s input to the IMO Correspondence Groups (CG) and for appointment of industry technical experts to Australian delegations for a series of relevant IMO meetings

• Co-submissions with Brazil to DSC 18 strongly supporting the IOF CG reports and for inclusion of TWG Information papers containing research reports

• Early Exemption Certificate Ex. 5186 in response to IMO DSC.1/Circ. 71

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DSC 17

Engagement Road and Key Relationships - IMO Correspondence Group

Incidents involving vessels carrying iron ore fines (IOF) triggered IMO, CA and industry responses, including IMO Correspondence Group process

DSC 16 • DSC 16 in 2011 established a Correspondence Group to:

— develop a draft individual schedule(s) for iron ore fines and

review the existing "iron ore" schedule as necessary

— consider the adequacy of and the possibility of improving current

methods and developing alternative methods for determining

transportable moisture limits for iron ore and iron ore fines for

DSC 17.

• At DSC 17 in 2012, Australia and Brazil presented on their respective

research programs, with Australia supporting further research work.

DSC 17 supported more work towards a better understanding of the

critical factors related to safe seaborne carriage of IOF before taking

a decision on a new schedule at DSC 18. The Correspondence Group

was continued with an updated Terms of Reference.

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Engagement Road and Key Relationships – IMO CG

Correspondence Group from DSC 17 Updated Terms of Reference

i. Consider the adequacy of methods for determining IOF TML and

consider new and/or amended methods to be included in Appendix

2 of the IMSBC Code.

ii. Consider the evaluated and verified research into IOF.

iii. Prepare draft individual schedule(s) for IOF and any required

amendments to Appendix 2 taking into account I. and II. above and

review the existing iron ore schedule, as necessary.

iv. Submit a report to DSC 18 in 2013.

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• DSC 17 requested a joint research effort with Australia and Brazil leading and input to DSC18 through the CG.

• The three largest iron ore producers, with the support of their respective Competent Authorities, formed a Technical Working Group (TWG) to coordinate research into the transportation of IOF with a common aim of ensuring the safe shipping of iron ore fines. TWG was accorded opportunity to provide technical input to the CG.

• Review and validation of TWG technical findings was provided by two processes;

- by international experts to TWG in relevant science areas followed by

- by independent scientific review by Imperial College and others via IG.

Engagement Road - IMO CG and formation of the TWG

DSC 17

CG

DSC 18

TWG

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Engagement Road and Key Relationships International Group G of P & I Clubs

• Ship insurers with an understandable interest in the safety of customers insured assets

• Provided rigorous scrutiny of TWG work programmes through sponsorship of the peer reviewers through Imperial College

• Retained experts external to independent reviewers at Imperial College (IC) to assist in their interpretation of technical exchanges between TWG and IC

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Engagement Road and Key Relationships Independent Peer Reviewers (Imperial College)

• Engaged and funded by IG in the interests of transparency of the scientific review of all TWG work

• Provided independent reviews of industry TWG work

• In-person and teleconference meetings held throughout 2013 with expertise covering all relevant disciplines

• Questions and challenges by IC were passed by IG P & I to the TWG at the conclusion of all four technical reports and then followed through until IC and IG P & I satisfaction was attained

• Records of IG P & I responses appear at the end of all Info papers to DSC 18

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Technical Road – Key Outcomes Technical Working Group – Membership & structure

• Comprised representatives

from Rio Tinto, BHP Billiton

and Vale.

• TWG members developed a

Charter to guide the Group’s

activities.

• TWG members operated in

compliance with international

and national competition and

antitrust laws and regulations.

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Rio Tinto

Vale

BHP Billiton

Testing/TML

Geotechnical

Marine

Third-Party Peer Review

Imperial College

International Group P&I *

Australia

Brazil

Competent Authorities

Other CG Members

CG Coordinator

*Representing International Group of P&I, BIMCO, Intercargo, International Chamber of Shipping and IFAN

DSC 18

Technical Road- Key Outcomes TWG – Approach & methodology

Producing “evaluated and verified research into IOF” for DSC 18

Technical Working Group

Correspondence Group

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Technical Process Road – Key Outcomes TWG – Approach & methodology

Iron Ore Material

Characteristics Vessel Size

Sea Conditions

Iron Ore Liquefaction Fundamentals

Reference Test Method

Routine Test

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Technical Road – Key Outcomes TWG – Approach & methodology

Laboratory Analysis & Testing

Vessel Monitoring

Scale Model Testing

Cargo Observations

Numerical Modeling

Comprehensive research-based approach

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Current testing methods Vessel & cargo behavior

Report #1 Report #2

Report #3 Report #4

Reference tests Adjusted testing methods

Report #5

Recommendations

Technical Road - Key Outcomes TWG - Approach & methodology

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Technical Road – Key Outcomes Research Outcomes – the “3 Pillars”

Conclusions/recommendations summarised in DSC 18/6/14 Report Annexes of the CG on the Transport of IOF in Bulk(Japan) (TWG Report 5) included;

1. A modified TML test for IOF be in included in IMSBC together with a new individual schedule for IOF Group A with < 35% by mass of goethite

2. Recommendation for revision of the IRON ORE Group C schedule to include IOF possessing > 35% by mass of goethite

3. Confirmation that Capesize vessels provide an additional layer of safety for the carriage of IOF.

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A total of 64 meetings over the year to develop and present technical

outcomes and including;

– 17 multi-day in-person sessions (Rio de Janeiro, London, Fremantle, Beijing, Tokyo)

– 39 conference calls (Principals and Technical) across time zones

– 11 technical engagement meetings in-person with IMO member states (Tokyo, Beijing,

Brussels, The Hague, Düsseldorf, London, Paris, Washington, Ottawa)

– 1 day Workshop/Symposium organised by CG Co-ordinator to present TWG Results

immediately before DSC 18

– Submission of Information papers to DSC 18 through Australia/Brazil which document

more than 1000p of peer-reviewed science on safe shipping for iron ore fines

Technical Road – Key Outcomes TWG Track Record : September 2012 (DSC 17) to September 2013 (DSC18)

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The Road Junction – Key Successes

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• Technical roadshow: August – September 2013 - With CA approval, in-person TWG visits to 11 member states seeking

support at DSC 18

- Through Australian High Commission, a joint London meeting of ambassadors/ permanent representatives (Australia, Brazil) with UK government

- Meetings with Flag states and NGOs with IMO consultative status

• IMO Symposium: September 2013

- IMO invitation to all member states

- a scene setter for DSC

The Road Junction – Key Successes

DSC 18 (September 16-20, 2013)

Consideration of the CG Report on IOF Transport

• “agreed to include the new test procedure for determining TML for IRON ORE FINES ”

• “decided to use a goethite content of 35% as a threshold for exemption requirements for Group A cargoes and.. endorsed the view that declaration of goethite content be incorporated in the new schedule” for IRON ORE FINES Group A

• “agreed with the draft amendment to the individual schedule for IRON ORE” to include IRON ORE FINES of > 35% goethite

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Conclusion of Iron Ore Fines Journey

• E & T 21 and MSC 93 (April- May 2014) – agreement on finalisation of

iron ore fines technical work

• Likely final IMO approval at MSC 94 (Nov 2014) or MSC 95 (May 2015)

• Voluntary adoption – January 2016

• Mandatory adoption – January 2017

New Collaboration Opportunities for CA and industry

• Coal and Bauxite TML

• HME Cargoes

The Road Ahead

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Summary : Key Challenges

• IMO will remain a political environment and retain its momentum on maritime regulations, potentially with a greater mandatory emphasis

• IMO participant knowledge or appreciation of scientific rigour cannot be assumed

• Opportunities to influence outcomes will be rare and require both political and technical momentum to succeed

• Strong relationships between CAs and industry, based on verified applied science, is a proven model to affect change, though this will never be easy

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Summary : Key Successes

• Delivery of maritime safety through science for iron ore fines carriage

• Well-established links between industry and Government (AMSA),

through a common acceptance of peer-reviewed science

• Raised industry awareness of IMO processes and raised government

awareness of industry practicalities, providing potential opportunities

for future effective advocacy

• Demonstration that industry competitors can work appropriately and

intensively together across national boundaries

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Questions