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Alang ship recycling falls to 16-year low; only 125 ships scrapped in FY24

Ship recycling or shipbreaking in Alang fell to a new low, with 125 ships dismantled in FY24 compared with 131 ships in the previous year, data from the Ministry of Ports, Shipping and Waterways and the Gujarat Maritime Board showed.

Shipbreaking yards in Alang recycled 944,069.25 of light displacement tonnage (LDT) in FY24 compared to 1,147,480 LDT in FY23 and 1,093,450 LDT in FY22. The LDT of shipbreaking yards in Alang in FY24 was the lowest since FY08 when Alang managed about 640,000 LDT.

The decline in the number of recycled ships in terms of tonnage came amid growing competition from yards in neighbouring countries. Data from the Ship Recycling Industries Association of India suggests that Alang handled 298 ships in FY14 and 187 ships in FY21.

Alang on the Gulf of Khambhat coast in Gujarat is home to about 135 shipbreaking yards with an overall capacity of 4.5 million light displacement tonnage. Last year, only about a third of the yards had vessels for recycling. Light displacement tonnage refers to the weight of a ship’s hull, machinery, equipment and spares and form the basis on which ships are sold for scrap.

The central government said in the FY22 budget that it would double the country’s ship recycling capacity by 2024. However, the government abandoned the proposal last year and instead said it would prepare a new five-year plan to revive the industry.

The Alang yard caters to 98 percent of the Rs 5,000 crore ship recycling industry in India, which employs more than 15,000 workers directly and several thousand indirectly. In July 2023, the Gujarat state government announced financial support of Rs 28 crore for the revival of the Alang-Sosiya Ship Recycling Yard.

Slowdown in recycling
Shipbreaking units in Alang blame the slowdown of the past two years on rising competition from Bangladesh and Pakistan.

“Shipbreaking companies in Pakistan and Bangladesh are being compensated by their government when it comes to bidding for ships,” an executive from a shipbreaking unit told Moneycontrol.

The executive added that competitors in neighbouring countries are ready to pay around $15-20 per tonne more than Indian companies as they have incentives provided by their governments that help them recover costs. This is why buying and recycling has fallen drastically, and 50 percent of the plots are lying idle in the yard.

Yards buy ships from companies through tenders. Once a tender is awarded, the vessel is benched at their facility and stripped down to salvage steel and other material that are sold. Higher fixed costs have made the business unsustainable, especially with the number of ships arriving dwindling, executives added.

Bangladesh, the executives said, can pay a higher price because scrap import is banned there, unlike in India, and hence it is dependent only on recycled scrap. The executives said shipping companies are also delaying the retirement of ships as freight rates have almost tripled since 2022.

Human rights, environment
Another reason for the drop in work at Alang is that only a handful of shipbreaking yards there follow human rights and environmental protection standards, which forces European companies to send their ships for recycling to other shipbreaking yards.

The norms at Alang, Asia’s largest shipbreaking yard, weren’t in line with the global standards, Vikash Agarwal, managing director of Maersk South Asia, told Moneycontrol in an interview last year. He said the company had invested in some yards to implement these norms.

Minister for Ports, Shipping, and Waterways Sarbananda Sonowal told Moneycontrol that the government has worked with shipbreaking yards at Alang to meet and follow international human rights and environmental protection standards.

However, while most yards are compliant with the International Maritime Organisation’s Hong Kong International Convention (HKIC) for the Safe and Environmentally Sound Recycling of Ships, 2009, they are not complaint with the EU’s Ship Recycling Regulation.

Over the years, a study by the Indian National Human Rights Commission and media reports have exposed breaches of labour rights, disregard for labour laws and safety standards.

Shipbreakers in Alang also allege that many ships from countries in Europe and elsewhere that follow strict environmental norms send their ships to Bangladesh and Pakistan by switching to flags of African countries where the laws are relaxed. Changing a ship’s flag, also known as the “flag of convenience,” to recycle ship is done to get a better price for vessels that are set to retire.

An investigation published in December 2023 found that more than 40 percent of the vessels that were owned or run by UK-linked companies and sent for recycling from 2018 to 2022 ended up in shipbreaking yards in South Asia even though they were prohibited under UK shipbreaking rules.

Under UK and EU rules, there are no approved shipbreaking yards in South Asia, where the industry has had a long history of worker deaths and injuries, poor working conditions and weak environmental standards. This means that no vessel sailing under a UK flag – or the flag of an EU country – can legally be sent to a South Asian yard for recycling.
Source: MoneyControl

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