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Ship-breaking Update

The shipbreaking site located on the Alang beach, Bhavnagar on western India's Gujarat state, scrapped about 350 vessels in the 2009-10 fiscal year, producing about 3m t of scrap.

In India, pursuant to Supreme Cout order, a Draft Code on Regulations for Safe and Environmentally Sound Ship Recycling (As on 30.09.2010) IMC Members are requested to send their comments/suggestions by e-mail to (Kind attention:-Under Secretary,MF Desk,Ministery of Steel,Udyog Bhawan,New Delhi 110107)(As on 30.09.2010)

In Pakistan, construction and engineering industries depend on the steel re-rolling industry, which acquires its raw material from ship-breaking or imported scrap.

Under the new policy the steel production target was set at 10 million tonnes by the year 2015 and 15 million tonnes by the year 2020. The present capacity of steel production is four million tonnes as against demand of over 6 million tonnes per annum, showing a gap of 2.5 to three million tonnes, that is, being met through import. The steel production units are functioning bellow capacity because of raw material shortage and slack demand.

To expand the steel sector huge amount is needed that Pakistan cannot afford. Besides, other elements like security of investment, foreign experts and continuous availability of raw materials at reasonable prices, uninterrupted supply of electricity is also required that lacks in Pakistan. Moreover, the steel sector is directly linked with the international market where iron and steel prices are on the rise and Pakistan has to follow the trend, as it cannot stand alone.

The steel re-rolling industry of the country is presently facing numerous problems as it is not getting raw material in sufficient quantity and utilising only 40 percent capacity against normal use of 80 to 90 percent. Moreover, due to slowdown in the construction activities, sale of steel products has decreased. For instance the production capacity of the re-rolling mills in Karachi was 5,000 tonnes per day, but the demand was only 2,000 tonnes per day.

Due to the shortage of raw material and other problems the prices of steel bars in the domestic market had at a time reached Rs 87,000 per tonne, which are now available at Rs 55,000 per tonne. The price was the lowest at Rs 40,000 per tonne last year when the scrap ships prices were at $250 per tonne to $280 per tonne in the international market.

The scenario of the steel sector in Pakistan indicates that this industry has a bright growth potential. The per capita consumption of steel in Pakistan is only 38 kilogrammes (kgs) as against global average of 175kg. If very modest increase in per capita steel consumption took place and reached 80kg in the next 10 years, the steel demand would be 16 million tonnes per annum for a population of about 200 million by the year 2020.

However, a 26.9 percent negative growth rate was recorded during July-March 2009-10 in steel products. Among the major factors behind this was the financial crunch in Pakistan Steel Mills (PSM).

World over the unprecedented economic slowdown started in 2008. It caused crash of steel products market in terms of both price and quantity wise and the production of steel industry had suffered very badly during 2008-09, which continued during 2009-10

Pakistan is an importer of basic raw materials of steel and due to the above situation PSM has suffered huge losses of Rs 26.5 billion in 2008-09, even it has not been able to import basic raw materials, iron ores and coal, as per its requirement. During July 2009 to February 2010, capacity utilisation was at 43 percent only.

Future plan: The domestic consumption of steel products is around 5.6 metric tonnes per year. Expansion in the production capacity of Pakistan Steel to three metric tonnes per year or above was planned. The plan would be implemented in two phases and completed in the next three to five years.

Pakistan Steel has also started an indigenisation programme to replace costly imported iron ore by locally available material and it is expected that 250,000 metric tonnes local iron ore will be arranged for PSM this year, which will be enhanced to 500,000 metric tonnes within the next three years.

Ship-breaking industry: The ship-breaking industry played an important role in developing steel industry in Pakistan. This industry started in 1970 and reached to its peak in 1980s.

The ship-breaking industry is an indispensable part of the economy for developing countries since it requires a small amount of investment and being mainly dependent on manual labour and is a good source of employment for the locals. From the point of ship owners, it provides a cash flow for the renewal of fleet, by disposing irreparable ships.

Ship breaking is perhaps as old as the shipping industry itself. It is the process of dismantling of an obsolete ship’s structure for scrapping. The scrapped metals, steel or iron, are used by the respective re-rolling industries as raw material whose products are used by the construction and engineering industry in Pakistan.

A ship’s life lasts for an average of 25 to 30 years after that it is supposed not safe to sail. About 95 percent of these ships are dismantled to recover steel. Scrapping a ship can make the owner an earning of about $1.9 million. However, the ships built before the 80’s have tonnes of extremely toxic substances, hazardous to human and environmental health.

Conducted at a pier, dry dock or dismantling ship includes a wide range of activities, from removing all gear and equipment to cutting down and recycling the ship infrastructure. The activity is a challenging job due to complexity of the ships and the environmental, safety and health issues involved.

In the early days wooden ships condemned were often burned or even carefully ‘lost’ in some convenient spot. Today the ship-breaking industry is run on scientific lines, and nothing is wasted. Sooner or later, every ship that sails into the sea is going to make its last voyage and the odds are that final journey will last at one of the ship-breaking yard on the coast of India, Pakistan or Bangladesh. The term ‘ship-breaking’ is slowly being replaced by ‘ship-recycling’.

In the 1970’s ship-breaking was done in the docks of Europe. It was supposed a highly mechanised industrial operation. But as European countries became more environmentally conscious they started taking health and safety measures, which escalated costs of scrapping. Therefore, about 90 percent of the ship-breaking industry moved to Asian countries, like India, Bangladesh, China, Pakistan and Turkey, as these countries were less environmentally and health conscious. Every year about 600 to 700 ships die and are brought to the beaches of Asia for scrapping.

From early 1980s to maximise profits ship owners sent their vessels to the scrap yards of India, China, Pakistan, Bangladesh, the Philippines and Vietnam where wages, health and safety standards were minimal and workers were ready to accept minimum wages. It was estimated that over 100,000 workers were employed at ship-breaking yards worldwide. Of them about 45,000 ocean going ships in the world about 700 (1.55 percent) are taken out of service every year. At the end of their sailing life, ships are sold so that the valuable steel, about 95 percent, of ships mass can be reused.

1 comment:

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