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Tuesday, September 15, 2009

Bangladesh: Record rise in import of scrap-vessels

Tuesday, 15 September 2009

Import of scrap-ships doubled in the last fiscal year due to sharp fall in its prices in the international market boosting the supply of raw materials to the country's steel sector. Local importers purchased 2.2 million tonnes of old ships mostly big sized in 2008-09 fiscal against 0.97 million tonnes over the same period in 2007-08, according to statisitics.
"We've imported ships of over 2.2 million tonnes last year. This is a record in the history of Bangladesh's ship-breaking industry," Enamul Hoque, a senior consultant of Bangladesh Ship Breakers Association (BSBA) told the FE.
The number of ships imported during the last fiscal year was 193 against 120 in 2007-08, he said.
Currently, an old ship costs around US$300 a tonne in the international market, which was $750 before the recession hit the globe in 2008.
Mr Enamul said local importers have added 19 more shipyards taking the number to 69 to cope with the increased number of old ships being imported in the country.
"Our importers are beaching four to five ships each week and are finishing cutting the same number a week," Zafar Ahmed, president of the BSBA told the FE.
Earlier, there were only 36 active ship breaking yards in Sitakundu, 20 kilometres north of the port city Chittagong, which dismantled 110 ships on an average every year.
"We now dismantle nearly 60 per cent of the ships sent to scrap-yards across the globe," said Zafar Ahmed, a leading ship breaker.
India breaks around 1.5 million tonnes a year followed by China 1.3 million tonnes, Pakistan 1.0 million tonnes and Turkey around 0.60 million tonnes.
The country's ship breakers offer at least 20 to 25 per cent more price than their competitors in India and Pakistan, making Bangladesh the preferred choice for the 'burial ground' of a large and medium sized ships.
Sitakundu of Chittagong has become world's largest ship-breaking destination as Bangladeshi importers have alredy beaten their competitors in India and Pakistan to buy the highest number of scrap vessels sold in the international market.
Association officials said the country's importers are now financially better off than many of their competitors in India, Pakistan and Turkey, enabling them to scour the world for any old ships up for sale anytime.
China, a large player in ship breaking industry, has now stopped buying scrap vessels because it already built up a buffer stock, they said.
The old ships are the main source of construction steel in Bangladesh. The country's re-rolling mills melt it after dismantling in huge slabs of steel.
The ship scrap melts steel to make 40-grade mild steel (MS) rod which has a major market in the country's steel sector.
The ship breakers supply around 80 per cent of the country's annual steel rod demand, which is met from scrap ships.
Showkat Ali Chowdhury, who owns Namrin International, the country's largest ship breaker, said the business grew tremendously in recent times as the demand for the steel rose sharply amid recovery in the construction industry.
"Importers are taking the adavantage of the sharp fall in its internaitonal prices," he added.
However, there has not been any remarkable impact on the prices of MS rod at the retail level. The price of 40-grade MS rod which went up to Tk 45,000 a tonne last year is now hovering around Tk 40,000 a tonne.
Source: The Financial Times