Environment rules:: Chinese steel export hit with ship recycling

ALANG, India/SINGAPORE (Reuters) – In the world’s biggest ship recycling centre 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 shipbreaking 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 economic.
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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.”
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.
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.
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