Saturday, July 18, 2015

Chinese competition: Gujarat's Alang, touted as Asia's biggest shipbreaking yard, witnesses 50% fall in business in a year

By Our Representative
According to reports from Gujarat's Alang, touted by the state officialdom as Asia's biggest shipbreaking yard, the number of active plots which take up ship recycling in order to extract steel and other economically useful material has fallen by 50 per cent over the last one year. Worse, the number of vessels which beached at Alang for ship recycling dropped to the six-year old of 275, with just about 54 ships reaching the yard over the last three months.
The reason, say knowledgeable sources, is that the shipbreaking industry has lately been badly hit by a flood of cheap Chinese steel, on one hand, and new European Union (EU) environmental rules, which require not to send ships to recycling yards which do not comply with the norms set for workers' safety, on one hand, and environmental cleanliness, on the other.
"The European Commission's intention is said to be not to discourage vessel owners from using facilities outside of the EU but to discourage ship owners from using facilities which have proven to present very real danger to life and the general environment. Five people were killed and 10 injured after an explosion in a chemical tanker being dismantled in Alang last year
The European Commission will reportedly introduce tougher environmental controls some time after December. While not specifically banning beach scrapping, owners of ships registered in EU countries will have to scrap them at approved facilities, a move that could favour countries such as China and Turkey where ships are taken apart in docks.
Despite the fact that China's economy has slowed down, its steel exports soared 51 percent to a record 93.78 million tonnes last year. Even this year, the steel exports have gone up by nearly 30 per cent in the first five months of 2015. In the meanwhile, more modern yards in are coming up in China and Turkey, which are competing "polluting" and "unsafe" Alang and other yards in the South Asian region.
Ships sold to Alang, along with other recycling yards in Pakistan and Bangladesh, till now have controlled about 70 per cent of the market. Most of the ships in these countries, which reach the beach during high tide, are manually pulled by by labourers, mainly migrants, further into the yard.
Equipment, such as radars, engines - and even tables and chairs - is taken off and sold, while the steel from the hull is removed for scrap.
Alang has been providing employment to 60,000 workers, mainly migrants from other parts of India, with thousands more being in the job in spin-off businesses. While once the the 11 km road which takes one to Alang -- controlled by the state regulatory agency, Gujarat Maritime Board -- used to be extremely busy with trucks till a year ago, it is deserted now, with shops displaying everything from crockery to computers taken off the ships struggling to get supplies.
Truck drivers who used to make from five to seven trips a day to Alang do not get more than two calls a day for taking scrap from Alang now. And, with a sharp fall in steel prices, shipowners are getting about $3.6 million less for the 25,000 tonnes of recoverable metal from a typical iron ore or coal carrying ship than what they got a year ago.
The situation is not very different at the shipbreaking yard at Karachi, where the situation has been described as the worst in the last three decades. And the story in Bangladesh is similar. Three years ago there were about 80 yards, now they are down to 25 at Chittagong. Local shipbreakers are quoted as saying that everyone thought prices would improve, but now they are sitting on huge inventories.

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