03 June 2015

Falling demand decreases imports of old ships:

Import of old ships for scrapping fell 20 per cent in July-April period of current financial year, due mainly to slow pace of public and private development work, officials and industry insiders said.

Local importers purchased old ships weighing 1.65 million tonnes in the current financial year (FY) against the import of 1.9 million tonnes in FY2013-14 and 2.35 million tonnes in FY2012-13, data from the National Board of Revenue (NBR) showed.

"Low demand in the local market and higher prices of old ships in the international market brought down import of the primary input of re-rolling mills significantly in recent years," Sheikh Hafizur Rahman, an importer of old ships, told the FE.

"The prices of old ships increased by around 15-20 per cent, while demand in the re-rolling mills decreased drastically at the same time because of slow development work both in public and private sectors," he added.

"Importers are reluctant to import increased number of ships as higher prices of old ships in the international market and its lower demand among the domestic re-rolling mills." 

Prices of an old ship, on a per tonne basis, jumped from less than $450 two years ago to US$530 now in the international market, Mr Rahman said.

Showkat Ali Chowdhury, owner of Namrin International, the country's one of largest ship-breaking yards, said the business expanded rapidly till 2011 because of lower prices of old ships in the international market and higher development work within the country.

But he added investment in the private sector has remained almost stagnant for the last couple of years for political instability and high bank interest rate, which pushed down demand of scraps in the country.

Old ships are the main source of making construction steel in Bangladesh. The country's re-rolling mills melt it after dismantling large slabs of steel.

The ship scrap is used to make 40-grade mild steel (MS) rod, which has a major market in the country's housing sector.

Ship-breakers supply around 80 per cent of the country's annual demand of raw materials used in rerolling mills, which are met from scrap ships.

Mr Chowdhury said local importers have added 27 more shipyards bringing the number to 77 to cope with the increased number of old ships being imported in the country earlier.

In the past, there were only 36 active ship-breaking yards in Sitakundu, 20 kilometres north of the port city Chittagong.

These yards used to dismantle 110 ships on an average every year. But in recent years, the number came down to around 80 to 90, he informed.

"Our importers used to beach four to five ships each week and would finish cutting the same number a week, but now-a-days there are many yards which cannot cut a ship even in three months," Mr Chowdhury said.

Since fiscal 2011, Bangladeshi breakers broke nearly 60 per cent of the ships sent to scrap-yards from across the globe, which is now gradually going down mainly because of poor market demand, said Abu Ahmed Shikder, a leading ship breaker.

He expressed the hope if the current political stability continues, then the demand for investment by the private sector would increase and the development work by the government will also be strengthened and thus activities at the ship breaking sector will start at a full swing.

According to industry insiders, India breaks around 1.5 million tonnes a year, while China does 1.3 million tonnes, Pakistan does 1.0 million tonnes and Turkey around 0.60 million tonnes.

Source: the financial express. 31 May 2015

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