Ship recyclers to fierce competition between India, Bangladesh and Pakistan

Ship_recycling.jpgThe resurgence that one saw in Indian ship-breaking activities could be short-lived as the industry in the region is entering another phase of development, impacted largely by legislative initiatives of local governments as well as by market forces.

Even though the Indian industry could recapture the title it lost to Bangladesh as the largest ship-breaking nation in the world by recycling 415 ships during 2011-12 , it was not a profitable year on record. The industry, with an estimated annual turnover of about Rs 10000 crore, reportedly lost almost Rs 800-1000 crore during the year due to rupee depreciation against US dollar. As the industry is dominated by cash deals, weakening rupee saw industry profits turning into losses, since October 2011.

"Having endured a difficult year so far with a struggling currency and huge volatility on the local scrap steel prices, a revival of sorts appears to have crept with many end buyers scrabbling to acquire tonnage after a relative lull in activity," noted GMS Weekly, one of the most sought after newsletters on the industry, a couple of weeks ago.

"Having been relatively quiet in the preceding few months due to a struggling currency (which saw some end buyers lose about 20% of the value of their previous purchases), India is now enjoying its moment in the spotlight as deals continue to be tucked away at vastly improved numbers (in comparison to the recent lows)," described the London-based publication.

Though Pakistan had emerged as the number two ship-breaking country last year followed by Bangladesh and China, the ranking is set to change this year with the resumption of ship-breaking activities in full form in Bangladesh from the beginning of the year.

Reported the GMS: "Bangladesh has indeed been the busiest market of the year so far, opening fully again at the start of the year." Though the weekly talks of a 'cooling on the cards' , ship-breaking activities in Bangladesh are expected to pick up pace to earlier highs as it tries to compensate for the losses incurred during its prolonged shut down last year.

In this context, the July 30 judgment of Supreme Court upholding Basel Convention is expected to add more fizz to the emerging competition in the subcontinent for ships for recycling.

The Supreme Court ruled that all ships coming for dismantling have to follow Basel Convention and if there is any violation, action should be taken according to the municipal laws. Accordingly, there should be prior decontamination by the country of export and prior permission by the country of import before a ship enters the Indian territorial waters.

According to experts, the changes to existing import formalities are expected to be minimal but inspections and certifications would take up more time for shipowners who want to dispose their ships for breaking . According to traders, this is going to add a cost element for the owners, which they will pass on to the buyers, thereby increasing the cost of recycling . Ultimately, whoever pays more will get the ship for breaking.

Ship-breakers are of the opinion that the ensuing scenario could lead to fierce competition between India, Bangladesh and Pakistan , the three competing neighbours in ship-breaking industry.

"We will have to wait and see. Only after 3-4 months one can say whether India will be able to keep the top title this year as well," said an Alang-based ship-breaker .

Source: The Economic Times