13 January 2012

Alang shipbreakers face Rs 2,000-cr hit from Rupee fall:

MUMBAI: Asia's biggest shipbreaking yard at Alang in Gujarat is facing rough weather due to rupee depreciation. Shipbreakers are likely to bear a total loss of Rs 2,000 crore for the fiscal year as the rupee fell by over 18% in the last 7 months.

Expecting no immediate respite from the current market conditions, the shipbreakers plan to meet the Finance Ministry this week to seek a cut in customs duty of 5% on further ship imports.

"Our industry has already seen a loss of Rs 1,500 crore in the last 9 months and, therefore, we seek a cut in customs duty that might cover further losses to some extent," says Vishnu Gupta, president of Ship Recyclers Industries Association.

Shipbreaking firms, which borrowed money from banks 3 quarters ago to finance foreign carrier vessels for breaking, will now have to pay back to banks at the prevailing exchange rates. So, the burden of additional payment is making them nervous.

In spite of receiving new business at the Alang yard, the industry is unable to get significant margins that have fallen over the last 3 quarters.

In 2011, nearly 34 lakh tonne of ships were bought by ship-breakers. who are expected to scrap 400 ships, 12% more than last year's 357 ships, at more than 110 yards till March-end. The number of ships that arrive for breaking has risen to 35 per month as against an average 28-30 ships.

"We have already recorded 254 ships till November and we are hopeful that it will go up to 400 ships by the end of March next year," says Bhavin Patel, a shipbreaker.

The beaching of ships also depends upon the last journey of the vessel and its proximity to the shipbreaking yard. The shipbreakers beach huge carrier ships at yards and demolish to obtain raw steel scrap that meets India's 30% of total requirement for steel scrap.

Steel scrap from demolished ships is a major source of raw material for the re-rolling mills, furnace units and steel plate manufacturers. The industry has sustained its raw steel scrap demand on the back of environmental restrictions in Bangladesh, higher costs in Chinese yards and a ban in domestic iron ore mining.

Source: By Tapash Talukdar, ET Bureau. 13 January 2012

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