Pakistan shipbreaking industry sinking while Bangladesh’s emerging:

Till 1985 Taiwan, Korea were leading countries in ship breaking industry while many other nations were actively involved in this business Later, the industry had undergone considerable consolidation as rising labour costs and environmental regulations forced the closure of most shipbreaking yards in developed countries. Resultantly, the industry shifted towards Asia on the back of environmental issues that gave a chance to Pakistan, India and China to emerge as leading shipbreaking countries. However, Bangladesh also set up this maritime recycling industry at its Chittagong yard.

Recently Bangladesh Supreme Court issued a verdict that lifted ban on the industry spurring its shipbreaking sector to progress leaps and bounds. It is stated that maritime firms of Bangladesh are expecting to scrap more than 30 million deadweight tonnes this year, surpassing last year’s 26.6 million and the figure of 28.3 million in 2009. The experts are of the view that if Bangladesh quickly ramps up its capacity, ship owners could scrap near the world’s capacity of 38 million deadweight tonnes, a level not seen for decades before. It is to be noted that before the ban, Bangladesh’s shipbreaking industry was worth $1.5 billion and considered to be a key contributor to the overall economy, providing steel mills with half of their supplies and employing as many as 150,000 workers.

With the boom in industry in Bangldesh, the average salary for a 12-hour day of labour intensive work has risen up to around $5.50, a decent wage compared to the nearly 40 percent of Bangladeshis that live on less than $1.25 a day. Conversely, rights activists in Bangladesh claimed that the cost of health of employees has been too high because of environment issues while more than 1,000 workers killed on the job since 1996. A 2003 government study found nearly 90 percent of workers suffered some form of accidental injury — from foot injuries to serious accidents — while working in Chittagong yards. The World Bank in December reported widespread contamination of lead, mercury and oil in the soil and water of Chittagong’s beaches.

It is not out of place to mention here that currently four nations including Pakistan, India, China and Bangladesh, with an abundance of cheap labour, control more than 90 percent of the shipbreaking market. However, after the lifting of ban on shipbreaking industry, Bangladesh’s investors have already purchased over 110 ships while dozens of vessels are in pipeline whereas at least 35 waiting for environmental clearance to come on shore for making them break into pieces. Bangladesh is becoming top ship recycling nation, hopes to bring in around 300 ships by the end of next year, up from 220 in 2009 before the ban.

On the other hand, after a long gap of over one decade, Pakistan’s shipbreaking industry at Gadani revived and as many as 30 ships, including oil tankers, are lined up at Gadani shipbreaking yard where they would be dismantled bolt by bolt, nail by nail and every cog of machinery would be utilised either in furnaces or as for old spare part.

Gadani shipbreaking yard

Gadani, situated about 50 km northwest of Karachi, has been known for its shipbreaking yards since late 1970s. In the 1980s, Gadani was described as one of the largest shipbreaking yards in the world, with more than 30,000 direct employees. However, in later years, on account of wrong policies of government, competition from India and Bangladesh lessened its output and its scrap production contracted to less than one-fifth. Again activities at shipbreaking industry are heading towards lacklustre point and only medium size ships including cargo and oil ships are anchored at Gadani shipyard.

In 2010 the industry produced 462,900 tonnes of scrap during the period. The prices of old vessel have gone up to $460-470 per tonne as compared to $350-370 in 2009.

It may be recalled that before 1970, Europe was the hub of shipbreaking industry across the world. The sector was based on highly mechanised industrial operation.

But as Europeans were more conscious of environmental standards as well as health and safety measures, costs of dismantling began to escalate. So European traders lose their interest in this industry and resultantly traders of Asian countries including Pakistan, India and China started to build up this industry in their respective countries.

It would not be out of place to mention here that every year around 600-700 sea vessels are dragged to beaches of Asia for scrapping. In India most of ships are scrapped at Alang, Gujarat. After the breaking of Tenjong vessel in 1983, Alang beach ranked world’s leading shipbreaking yard. But now Chittagong is emerging as another big Asian shipbreaking yards where workers could be seen working without much safety measures. While the workers of Gadani, though not insured, are getting fair wages but facing same environmental issues like Bangladeshis workers. However, traders claimed that in case of an accident, they used to give these labourers an acceptable compensation adding that in case of death, family of a worker is paid Rs 0.3 million by the owner and another Rs 0.3 million is also compensated by government. He said that in case of an injury, all the treatment charges are covered. The surprising fact is that a victim could draw his wages continuously unless he remained under treatment.

Shipbreaking industry mainly produced ship plates that are used in re-rolling mills who in turn produced iron bars, necessary for the construction of buildings. Countless small steel re-rolling and re-melting mills in Pakistan used these ship plates as they are cheaper comparatively than Pakistan Steel Mill’s iron billets. The non-availability of raw material (ship plates) to re-rolling mills could force them to switch off their running wheels as PSM products price remained high and always fluctuate from time to time.

It may be interesting to note that more than 95pc of the scrap of vessels dragged towards Gadani is recycled and reused. Traders not only get ship plates from these ships but also get washbasins, furniture and other fixtures from these vessels. Some time, owners also get some antiques that they sold them in open market on exorbitant prices.

In a bid to give boost to maritime recycling industry, the Bangladesh apex court lifted the ban this year on the condition that industry would adopt strict rules to protect workers including age limit of at least 18, training and proper safety gear and cleansing of toxic material from ships prior to arrival. The federal court has given the industry just few months to prove itself as workers-friendly or face reimposition of the ban.

It is suggested that by following the footsteps of Bangladesh, federal and Sindh governments should take measures to ensure healthy business environment by giving incentives to traders including soft loans and subsidies in addition to resolve the health-related problems of workers, so that more and more vessels could be purchased and dragged to Gadani yard in a bid to provide maximum job opportunities to local labours and utmost revenue generation for the government.

Source: By: Syed Mohammad Tahir | Published: May 30, 2011

http://nation.com.pk/pakistan-news-newspaper-daily-english-online/Business/30-May-2011/Local-shipbreaking-industry-sinking-while-BDs-emerging/1