Ship recycling industry poised for boom in times of recession

November 26th, 2008 - 7:21 pm ICT by IANS  

Ahmedabad, Nov 26 (IANS) The Ship-breaking industry in Gujarat foresees sunny days ahead, provided banks fund ship-breakers to acquire the large number of old ships that are being offered for demolition worldwide, a member of the industry said here.Such a move during the current recessionary trends would open an enormous opportunity for India to boost output of steel at home, according to Chetan Tamboli, chairman of Rushil Industries Limited of Bhavnagar and a member of the Ship Recycling Industries Association (SRIA).

Tamboli was making a presentation at a seminar on the present economic scenario and its impact on SME sector in Gujarat, organised by the State Bank of India, Gujarat circle.

Tamboli said globally there was an excess supply of old ships for trade and more than 750 ships of 1981-82 vintage are now available for demolition, thanks to the present economic upheaval.

“Whenever there is a recession, ship recycling industry flourishes,” Tamboli said.

“In 2009-10 alone, the ship recycling industry at Alang will demolish close to 2.5 million tonnes due to easy availability of ships for demolition and because of very high profit margins,” Tamboli said.

Tamboli said in October this year ship price per tonne was quoted at $300 compared to $750 per tonne in June 2008. The cost price per tonne of steel thus worked out to Rs.15,000 while the market price of steel hovered around Rs.20,500 per tonne.

He added that capital employed to produce one tonne of steel at an integrated steel plant worked out to Rs.28,400 and the gestation period was three years.

For the same tonne of steel, a mine steel plant required a capital of Rs.2,500 per tonne. The capital employed to generate the same quantity through ship recycling activity was not more than Rs.300. The gestation period was just two months.

The advantages of generating steel through ship-breaking were manifold, Tamboli said. There was saving of natural resources like iron ore, coal, refractory materials. Every Rs.10 million invested generated large employment. Ship-breaking involved zero electricity and water consumption per tonne of steel.

To enable quicker purchase of old ships, the import duties need to be scrapped, Tamboli said.

To stimulate the demand for steel, the excise duty should be reduced from the current level of 14 percent to 8 percent for steel made through any source - whether integrated steel plant, secondary steel producer or ship recycling industry, Tamboli added.

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