07 December 2011

Alang bleeds as rupee falls against dollar:

While Indian shipbreaking industry generally loves a global economic slowdown since it means more old vessels being sent to it to be dismantled due to fall in international freight fares, it has no such reason to cheer this time around.

For, rupee’s depreciation against the American dollar has put Alang, the largest shipbreaking yard of Asia located in Bhavnagar district that sets industry trend in the region, in a soup. With over 100 shipbreaking plots, it currently accounts for over 30 per cent recycling of steel and iron in world.

For deals signed in the past six months, shipbreakers at Alang have to shell out Rs 1,000 crore more than the amount at which prices were fixed for the old ships.

“After signing deals, we are generally given 180 to 200 days to make the payments,” said Alang Ship Recycling Association president Vishnu Kumar Gupta.

Contracts for nearly 40 ships were signed in July-August and these ships are at present in Gulf of Khambhat on their way to Alang.

“But when contracts were signed, rupee was valued somewhere between Rs 42 and 44 against the dollar. Now, the figure is hovering around Rs 51,” Gupta said. “Despite slowdown, ships, on an average, have become 15 per cent costlier for us.”

For Alang, said Gupta, this simply meant an increase in purchase expenditure by at least Rs 1,000 crore.

Even the latest report by rating agency CRISIL Ratings, which has forecast that the Indian shipbreaking industry, which mainly means Alang, will increase its share in the international business to 45 per cent from its current 34 following slump in freight rates, has failed to cheer up dealers and breakers.

“Situation this time around is quite complicated. In 2008, Alang was clearly a winner, getting overwhelming business even as rest of the world bled. This time, currency fluctuation has made it worse of us,” said R Bansal, a shipbreaker.

CRISIL Ratings has also predicted that with new stricter laws imposed for this industry, Bangladesh and China have become costlier destination, and Alang can reap rich benefits.

But Alang, where the shipbreaking business employs over a lakh workers, is keeping its fingers crossed.

“Alang-bound traffic is expected to increase, but it is not expected to be unprecedented. All we can do is wait and watch,” said Gupta.

Source: The Indian Express. By Hiral Dave. 6 December 2011

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