In the world's biggest
ship recycling center of Alang on India's Arabian Sea coast, workers with blow
torches cut segments of steel stripped from the rusting hull of a towering
cargo ship, sold for scrap by its Japanese owner.
But in this town -
located in Prime Minister Narendra Modi's home state of Gujarat - more than
half of the ship-breaking yards have shut in the past two years and the future
of the trade in India and neighbors Bangladesh and Pakistan is bleak.
The industry has been
hit by a flood of cheap Chinese steel and new European Union environmental
rules due later this year threaten to push business to more modern yards in places
like China and Turkey - in turn devastating local economies.
"People are
running this business from their heart, not from their mind," said Chintan
Kalthia, whose company R.L. Kalthia Ship Breaking Pvt Ltd runs one of Alang's
more modern yards.
Still, he takes pride
in the fact that after months of negotiations with a Japanese owner, his yard
secured the biggest ship currently being recycled in Alang.
"But this is my
last ship. This business is dying," he added, suddenly sounding weary, as
workers outside his beach-side glass office sized slabs of steel peeled from
the ship.
Ships sold to South
Asian breakers, which control about 70 percent of the market, are winched at
high tide onto a beach, where they are taken apart by mostly migrant laborers.
Equipment, such as
radars, engines - and even tables and chairs - is taken off and sold, while the
steel from the hull is removed for scrap.
The trade in Alang
used to employ about 60,000 directly, with thousands more in spin-off
businesses, said yard owners.
But roads on the 11 km
(7 mile) beach front that locals say used to buzz with people and trucks now
appear deserted and dozens of shops displaying everything from crockery to
computers ripped out of ships are struggling to get supplies.
"I used to make
five, six, seven trips a day," said Munna, sitting atop his tractor with
extra wheels able to carry heavy scrap from the yards. "Now I hardly get
one or two calls."
BLAME CHINA
With a plunge in steel
prices, ship owners are getting about $3.6 million less for the 25,000 tonnes
of recoverable metal from a typical iron ore or coal carrying ship than just
eight months ago.
The finger of blame is
being pointed at China.
"China is selling
below the price of recycled steel," said Amit B. Padia, owner of Sagar
Laxmi Ship Breakers, as an orange crane lifted a bathroom removed from a ship
onto a trailer.
With China's economy
slowing, its steel exports soared 51 percent to a record 93.78 million tonnes
last year and are up nearly 30 percent in the first five months of 2015.
The impact has been
felt in Alang where the number of active yards fell to 50 this year from more
than 100 in 2014, according to the Ship Recycling Industries Association India.
The number of vessels
beached also dropped to a six-year low of 275 last year and was only 54 in the
last three months, it said.
"WORST IN 30
YEARS"
The situation in
Pakistan appears equally bad.
"It has always
been a cyclical business but people who have been in this industry tell me this
is the worst in 30 years," said Shoaib Sultan, the owner of Horizon Ship
Recycling in Karachi.
The story in
Bangladesh is similar.
"Three years ago
there were about 80 yards, now it's down to 25. I think another 10-15 yards
will go," said Zahirul Islam, director of PHP Shipbreaking and Recycling
Industries Ltd in Chittagong.
Ship breakers globally
bought 25.2 million deadweight tonnes (dwt) of vessels up to early July,
against 33.8 million dwt all of last year, with Bangladesh the largest buyer,
according to shipping services firm Clarkson.
"Everyone thought
prices will improve and bought a lot, but now they are sitting on huge inventories,"
said Islam.
"It will be a
disaster in the coming months."
It takes up to nine
months for a typical bulk carrier in India to be broken up and its steel
processed, said Rakesh Khetan, chief executive of Singapore-based Wirana
Shipping Corp, a major buyer of ships for scrap.
ENVIRONMENTAL CONTROLS
As well as facing
pressure from cheap Chinese steel, there are also calls to stop beach scrapping
because of the danger and environmental damage from pollutants left to drain
into the sea.
Highlighting the
risks, five people were killed and at least 10 injured after an explosion in a
chemical tanker being dismantled in Alang last year, local media said.
Workers can also face
health hazards such as lead paint and asbestos when working on ships.
The European Commission will introduce
tougher environmental controls some time after December. While not specifically
banning beach scrapping, owners of ships registered in EU countries will have
to scrap them at approved facilities, a move that could favor countries such as
China and Turkey where ships are taken apart in docks.
"The European Commission's intention
is not to discourage vessel owners from using facilities outside of the EU but
to discourage ship owners from using facilities which have proven to present
very real danger to life and the general environment," said Mark
Clintworth, head of shipping at the European Investment Bank.
In a bid to allay
environmental concerns, some yards in South Asia have cemented their work area
to try to prevent seepage of oil or chemicals, but many lack the money to do
this.
"It takes about
$5 million to improve a yard. How can somebody do that when they are
bleeding?," said Islam of PHP Shipbreaking in Bangladesh.
Clintworth said his
bank and the European Commission could provide investment for South Asian ship
scrappers to improve existing operations, as well as for safer and more
environmentally friendly new facilities.
But for many that could come too late and
some, including Alang's Sagar Laxmi Ship Breakers, are simply targeting other
industries such as construction.
Source: Reuters. 17
July 2015
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