Ship-breakers revenue likely to rise by 10 % this fiscal

Mumbai: The domestic ship-breaking industry's revenue is expected to see a 10 per cent year-on-year increase this fiscal due to improved availability of condemned vessels and higher rates for steel scrap, ratings agency Crisil said on Monday. Further, with India enacting the Recycling of Ships Act, 2019, and joining the Hong Kong International Convention (HKC), which sets the standards for ship recycling, the move has bolstered the country's leadership position globally, it said. According to the report, a plunge in global trade due to the Covid-19 pandemic weighed on sea freight, hurting viability of shippers and making more vessels available for dismantling at cheaper rates.

Consequently, from the second quarter starting July 2020, there was a sharp rise in the number of vessels bought for breaking, compared with muted activity in the first quarter. Usually, the vessel procurement rate is about $ 20-30 per tonne higher than the steel scrap selling rate, which indicates shipbreaking is a loss-making proposition. But the key to profitability lies in the sale of higher-value non-ferrous metals, oil, and furniture found on condemned ships, which form a sizeable part of the vessel scrap beyond steel, as per Crisil.

A vessel typically comprises 30 per cent of such non-ferrous products and 70 per cent steel. Sales of non-ferrous products offset the loss incurred in scrap steel sales and operating overheads, it said. The procurement price of ships condemned for dismantling was down by over $ 75 per tonne, averaging at about $ 320 per tonne for the first six months in the current fiscal, when compared to corresponding period of previous fiscal, thereby making it lucrative for ship breakers, it said. "Indian ship-breakers are set to procure between 230 and 240 vessels, with a combined weight of over 1.9 million light displacement tonnage (LDT) this fiscal, compared with 214 vessels weighing 1.77 million LDT bought last fiscal.