Ship breaking industry – Recession or Bonus

The global slump in the shipping industry is turning out to be a boon for the ship breaking industry in Alang, Gujarat (India) where around 60 vessels have arrived for scrapping from December 1 to January 15. According to people associated with the industry, around 100 ships have landed in Alang for dismantling in the last two months and the trend will continue because of global recession. Alang is all set for a new record in scrapping the largest number of ships in 2009 as more than 600 ships are available for dismantling in the international market due to slowdown in the global trades, said president of Alang Ship Breaker Association.

The ship breaking industry will provide cheapest steel to the industry. As a result, around 80 plots have become operational at Alang’s ship breaking yard where three months ago, the industry was finding it difficult to survive and only 30-35 plots were being used.

As per the data provided by Gujarat Maritime Board (GMB) on arrival of ships, in last 45 days, 57 ships have got beached at Alang yard and 15 have more than 10,000 tonne capacity, while two ships are of more than 20,000 tonne. Most of the other vessels have tonnage capacity of more than 5,000 tonnes.

Arrival of large number of ships at Alang also means increasing revenue of GMB, which charges Rs100 per ltd (light displacement tonnage) per ship.

Presently, they are getting various types of vessels like general cargo carrier, bulk cargo carrier, oil and gas tanks and chemical tanks, said a Bhavnagar based ship agent.

International shipping companies and ship owners are retiring the ships for dismantling because exports have gone down worldwide and there is not enough cargo to transport. Since there is unavailability of cargo, vessels remain idle, which nobody can afford considering high costs of maintenance of vessels, crew and other costs. This is the exact reason why there is increasing availability of vessels for dismantling.

Vessels are sold between $250 to 300 per tonne, while local scrap market rates are around Rs18,000 per tonne.

Arrival of increasing number of ships at Alang is also having a positive impact on the ancillary units like oxygen refilling plants and steel re-rolling mills in and around Bhavnagar.

Presently, 25 oxygen refilling units are operating and 15 new units are in the pipeline and would become operational very soon. Steel re-rolling mills, which were closed earlier, have started functioning again because of supply of raw materials, which are steel plates. Moreover, apart from catering to the local market, steel plates and raw materials from Alang are going to Punjab, UP, Haryana and J&K where ingot-based mills use scrap material from Alang because it is very cheap.

The raw materials available in ship breaking are of exclusive quality and it is economical for small and medium engineering enterprises to procure the same from ship breaking vendors. More over the ship broken shafts and plates of odd sizes can also be sourced by small and medium engineering enterprises at lower costs. For the same if they would have procured from new raw materials they have to incur further reprocessing charges like forging, plate rolling etc.

In this economic down turn it has become a win- win situation for ship breakers and engineering workshops because of supply matching demand. “Win-win” because, the whole cost can be brought down to a much competitive scale because of sourcing from the ship breaking industry. May be this can be termed as a ‘Blessing in disguise’.