Despite amazing rise in light displacement tonnage(LDT), the shipbreaking industry at Alang is facing a major challenge of decreasing demand of the end product made out of scraps that the shipyard supplies.
Shipbreaking industry at Alang, which was struggling for its survival some years back is now thriving with business with whopping 336% growth in total LDT in the first quarter of the current fiscal. During the first quarter this fiscal, the yard had 7.87 lakh LDT from 91 vessels against 1.80 lakh LDT from 37 vessels in the corresponding period.
However contrary to this pink picture of progress on supply front, the situation on demand front is somewhat grey.
About 80% of a ship’s steel is “reusable steel” cheaper than primary steel and used mostly in construction. The units at Alang Sosya shipbreaking yard mostly supply such steel scraps to manufacturer of duplicate TMT bars. But now the buyers demand for strong, original and quality TMT bars, which can’t be manufactured by using scrap from the ships. In fact scraps can not be used for any other purpose. With a property slump from the global recession, demand for steel has fallen and prices have dropped by 80% since mid-2008 when steel along with other commodities were enjoying record highs.
Just before two months, steel was sold at Rs 16,000 to 18,000 a tonne. But then the prices came down to Rs 13,500 to 15,500 due to lesser demand in the prime markets such as Uttar Pradesh, Punjab and Mumbai.