Ship-breaking Industry Booms in Alang Amidst Global Trade Slowdown
India has the largest ship-breaking industry at Alang, situated in coastal south Gujarat. The industry serves more than 55% of the market globally. The industry is now expected to prosper given the slowdown in trade because of Covid-19 worldwide.
According to a CRISIL report the Indian ship-breaking industry is like to experience a 10% growth in revenue during this fiscal year. This is due to better accessibility to condemned vessels and increased costs of steel scrap.
Covid-19 triggered a drop in global trade, weighing on sea freight, thereby affecting practicability of shippers. This also resulted in more vessels being made available for disassembling at inexpensive rates.
Subsequently, July 2020 onwards there was a significant rise in the quantity of ships purchased for dismantling. This was in comparison to the subdued activity in the first quarter of 2020, i.e. prior to July.
Director of CRISIL, Rahul Gulha stated some figures to explain how a 10% increase in the revenue of the ship-breaking industry was calculated. While drawing a comparison with previous fiscal year he said this year 230-240 vessels were set to be procured. These vessels he said weighed more than 1.9 million light displacement tonnage (LDT) collectively. However, in comparison, the previous fiscal year saw the Indian ship-breakers acquiring 214 vessels weighing up to 1.77 million LDT. The effect on steel scrap is that it has gone up from Rs 26,558 per ton to Rs. 27,624 per ton.
Komalkant Sharma noted that revival of demand for the creation of infrastructure has increased requirement for secondary steel. Sharma is the Chairman of Leela Group of Companies in Bhavnagar, which is currently amongst the largest ship recyclers in India.
The deprived infrastructure, ecological issues and a number of other issues from competition to dumping had pushed Alang’s ship-breaking industry into crisis. It had to face competition from Pakistan’s Chittagong and Bangladesh’s Gadani while also being dumped with China’s secondary steel.
Aland can facilitate dismantling of up to 450 ships in a year and the capacity of re-rollable stell scrap is 4.5 million tons per month. This potentially gives it a turnover of more than Rs 6,000-Rs 7,000 crore. At the 100 operational out of 160 yards, two years gave different results owing to the financial crisis that followed 2012. In 2012 where the number of vessels scrapped were 432, in 2015 it fell to 196. 2012-2013 saw a decrease to 392, in 2013-2014 it was 298, and in 2014 275 and 2015-16 saw a further fall of 249. During this economic slump, ship recyclers either went bankrupt or exited business in Alang.
Alang finally responded to the growing concern for the ship-breaking business. The guideline it adopted was the safe and environmentally sound recycling one that is from the Hong Kong International Convention. 2016 onwards the slowdown in trade along with the Hong Kong Convention standards adapted to have brought more business for ship recyclers. For instance if in 2016 it was 313 ships with 3,448,106 metric tons the number increased to 23o in 2017 with 26,77,754 MT.