Rising competition from Pakistan and Bangladesh has led to ship breaking activity at Alang in Gujarat declining by almost 50 per cent during the fourth quarter of 2016-17.
Only 64 ships have been delivered for breaking during January-March as against 120 ships in the corresponding period of 2016.
According to ship breakers, both the neighbouring countries are offering higher prices for ships because they depend on recycled steel.
About 40 per cent of their requirement comes from recycled steel while in India’s use of recycled steel is just three per cent. India is offering $370-380 per tonne while Pakistan and Bangladesh are paying $10-15 higher.
“Overall ship availability for breaking has gone down in the past few months and at this time both Pakistan and Bangladesh are offering higher prices than India,” said Haresh Parmar, director of Shiv Ship Breaking Company at Bhavnagar in Gujarat.
Alang, 60 km away from Bhavnagar city, was developed by the Gujarat government in 1982.
graph At the time, 46 plots for ship breaking were active and this gradually rose to 170 plots, of which 135 were owned by ship breakers and 35 were with the Gujarat Maritime Board (GMB). Ships bigger than 3,000 tonnes came in for dismantling; the biggest one was 85,000 tonnes. Currently, about 100 plots are operational.
The other factor at play is a higher Baltic Dry Index (BDI), the key indicator for freight rates. When it goes up, fewer ships come up for recycling. After reaching a two-year high at 1,338 two weeks ago, the BDI fell to 1,215 in the first week of April. But in the second week it climbed to 1,296.
Jivraj Patel, president of the Ship Recycling Industries Association of India, said, “Movement in the BDI affects the ship breaking industry. Currently it is on the upside. This has increased ship prices by $50 per tonne in the past two months.”
According to the association, prices were about $325-340 per tonne, which have now climbed to $375-400 a tonne. The industry is expecting that the trend will change in the second quarter of 2017-18.
Source: Business Standard