Alang ship breakers facing headwinds on weaker steel demand and sliding rupee
Business Standard reported that there are concerns amid caretakers, workers and even bankers on Alang, till recently world's largest site for breaking up and disposing old ships. Work has dwindled substantially and daily wages have declined from Rs 350 in better times to Rs 250.
A branch manager of a public sector bank says he doesn't have much to do, except for dealing with pestering co-workers who are seeking a half day's leave. His workload has halved in recent years.
Alang, 60 km away from Bhavnagar city, was developed by the Gujarat government in 1982. At the time, 46 plots for ship breaking were active and this gradually rose to 170 plots, of which 135 were owned by ship breakers and 35 were with the Gujarat Maritime Board (GMB). Ships from 3,000 tonnes upward came for dismantling; the biggest one, a few years earlier, was 85,000 tonnes.
However, in the past two years, 100-odd units have closed; a little over 30 remain. An estimated 25,000 workers of an earlier workforce of about 35,000 have left for their hometowns in Uttar Pradesh, Odisha, Bihar and Jharkhand. The remaining ones are working for half a day.
What is causing this situation is the rupee's devaluation against the dollar in recent years. This had reduced shipbreakers' global competitiveness in bidding for shipbreak contracts. The rupee is down from Rs 55 to a dollar in 2013 to Rs 65.19 in 2015 (as on Tuesday), down 18.5 per cent.
As a result, the numbers of ships arriving at Alang for breaking have fallen from 40-45 a month around two years earlier to 15-20 a month. As against 212 ships during January to August in 2014, the period this year saw 143 arrived for breaking. "We have to pay more in rupee terms to buy ships. And, fluctuation in the rate against the dollar has restricted us from taking risks (ship breakers pay the money over a six-month period)," said Ramesh Mendpara, vice-president of the Ship Recycling Industries Association of India (SRIA). Bangladesh and Pakistan are bidding at better prices as their currencies have not devalued much against the dollar.
Also, there is lower demand for steel and this is hurting re-rolling mills. Ramesh Aggarwal, director of Hooghly Shipbreakers and secretary of SRIA, said: "Demand for ship scrap from steel re-rolling mills is very dull because of the weak steel market in India. Around three per cent of total steel consumption of India comes from ship scrap."
According to industry sources, cheaper exports by China has affected most.
Source : Business Standard