Alang faces tough competition as Bangladesh shipbreaking yards resume work:

Alang Beach near Shipbreaking yard

Business at Alang’s shipbreaking yards plummeted by half in April as rival facilities in Bangladesh reopened after a 10-month closure ordered by the courts there over environmental concerns.

This is the sharpest month-on-month fall in two years at Alang, near the Gujarat town of Bhavnagar and home to Asia’s largest ship-breaking facility.

“The fall is due to competition from Bangladesh, which resumed shipbreaking operations at around 60 of its 110 shipbreaking slots from April after getting conditional permission from a Bangladesh court, which had banned shipbreaking activity for almost 10 months on environmental issues,” said a port official at Alang on condition of anonymity, as he was not authorized to speak to the media.

Alang received 20 ships with a tonnage of 139,596 in April compared with 34 ships and 302,356 tonnes in March.

“The fall in tonnage and ship arrival in April is the sharpest in the last one year. The fall is also the sharpest if compared with April last year,” said Vishnu Gupta, president, Ship Recycling Industries Association India (SRIA). “This is mainly due to competition from Bangladesh, which has started buying ships aggressively.”

This may be the beginning of a slow growth cycle for the Indian shipbreaking industry as the situation is likely to worsen in the next few months.

“We are offering around $500 (Rs.22,650) per tonne rates to sellers while Bangladeshi recyclers are offering more than $520 per tonne as they want to make up for lost business, which is why most sellers are preferring Bangladesh over India,” explained an Alang-based recycler who did not want to be named.

He said Indian shipbreakers cannot afford to buy ships at higher prices as they mostly sell their scrap steel in the domestic market, where there is a disparity in the prices between ship-buying rates and scrap steel rates.

“We are buying ships at around $500 per tonne while scrap steel prices are at Rs.23,000 ($507) per tonne. We are losing our business to Bangladesh as they can afford to buy ships at higher rates because of lower labour costs,” the shipbreaker said.

Indian ship breakers have seen profit margins shrink, said SRIA vice-president Vippin Agrawal. He didn’t elaborate on the extent of this shrinkage.

The neighbouring nation is also attracting companies that intend to scrap larger vessels, which is a concern for Indian shipbreakers.

“Bangladesh has bought dozens of ships in the last one-and-a-half months and is in final negotiations with two international firms willing to scrap two VLCCs (very large crude carriers that weigh 200,000-320,000 tonnes each),” said a shipbreaker at Alang, also requesting anonymity.

Email and phone calls to Hefazatur Rahman, president of the Bangladesh Ship Breakers Association, did not elicit any response.

“We are already facing problems of smaller ships coming for dismantling for the last one year. Competition from Bangladesh has added to it,” said SRIA’s Gupta.

In 2010-11, Alang scrapped 357 vessels against 348 vessels in 2009-10. However, tonnage at Alang’s 173 slots fell to 2.8 million tonnes (mt) from about 2.96 mt in 2009-10, the highest in 12 years, Gupta said. The fall in tonnage despite more vessels is because of their smaller sizes, he said.

Alang’s shipbreakers have cancelled plans to hire more workers, Gupta said.

“In 2009-10, when the industry was faring well, we were planning to raise the workforce to 25,000 from the current 15,000. That plan has been cancelled. If the situation doesn’t improve in the coming months then we may be forced to reduce the workforce,” Gupta said.

Source: LiveMint.com. By Soumitra Trivedi, soumitra.t@livemint.com. Friday, 27 May 2011

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