The ship breaking industry in India is experiencing an impressible growth, a welcome relief after the Covid pandemic had slowed down the industry and almost brought it to a grinding halt. However, things are looking brighter now. According to Credit ratings agency Crisil, the domestic ship breaking industry’s revenue is expected to increase by 10% year-on-year this fiscal.
The growth can be attributed to higher rates for steel scrap and increased availability of condemned vessels. The industry’s growth was also driven by India enacting the Recycling of Ships Act, 2019, and joining the Hong Kong International Convention (HKC). The act, which provides for safe and environmentally sound recycling of ships, has strengthened India’s position in ship breaking, globally.
Increased Availability of Ships
Due to the fall in global trade due to the Covid pandemic, more vessels were available for dismantling, at lower costs. In addition to tankers, containers and bulk carriers, the ship breaking companies also received other types of ships and boats.
Alaap, the Assistant General Manager at RL Kalthia Ship Breaking Pvt. Ltd. said “We have received a higher number of cruise lines, small ships, tug boats (1000 tonnes, 2000 tonnes), oil drilling ships.”
“We have also received car carriers; due to the travel restriction, the selling of cars slowed down, and many car carriers had arrived for ship breaking.”
Cruise ship arrivals have increased at ship breaking yards over the last 12 months, especially Alang in Gujarat. This can be attributed to the slow down in Cruise tourism in the last 1.5 years. The owners are struggling with crew maintenance, vessel maintenance, payment of salaries, anchorage charges and even bankruptcy. However, the cruise industry is slowly picking up now.
Before things started getting better for the ship breaking industry, it struggled greatly due to the Covid pandemic. The industry was hit by many problems including the migrant crisis and the oxygen crisis.
The Migrant Crisis
At the start of the pandemic, when India imposed a complete lockdown, the ship breaking operations were closed. During the lockdown, the migrant labourers left for their homes. As a result, when the first lockdown was lifted, the ship breaking industry faced a severe labour crunch. The ship breaking companies tried to hire the local labourers. However, the labourers were not proficient and also came at a higher cost. This impacted the overall profits. Moreover, even after hiring the local workforce, the companies had only 25% of the total workforce because of the migration.
The Oxygen Supply Problem
The ship breaking industry faced another hurdle in April 2021, when the Indian Government ordered the oxygen supply to be diverted to local hospitals to help treat Covid patients. This was in response to the largest wave of infection in the country. As the ship breaking work requires the use of liquefied oxygen fuel torches to cut through the metal, the lack of oxygen supplies led to greatly affected the operations. The oxygen costs also soared during this period, increasing the operating costs for the ship breaking companies.
A Brighter Future
The ship breaking industry has successfully braved the problems brought in by the pandemic and things are looking brighter now with oxygen supplies back to normal and the return of the workforce. Also, according to Crisil, the government is seeking to double India’s ship recycling capacity by fiscal 2024 by targeting more scrap vessels from the European Union leveraging Hong Kong International Convention (HKC). This will strengthen the domestic ship breaking industry and lead to increased profitability.
