SHIP-BREAKING INDUSTRY
SIGNS OF REVIVAL?

The biggest ship ever to be scrapped at Gadani and the sense of jubilation in the ship-breaking circles is all too pervading.

By SYED M. ASLAM
Sep 15 - 21 , 2003 

Gadani once basked in the glory of being called the biggest ship-scrapping yard in the world. Till the early 1970s, it used to be a sleepy little fishing village off the sun-baked coastal area of the Balochistan province first witnessing the small-scale ship-breaking activities in 1974. Ideally located at a convenient distance from Karachi, the biggest urban centre of the country, Gadani attracted entrepreneurs who saw great opportunities to turn steel into gold. By 1977 it had developed into a large-scale ship-breaking yard providing employment to thousands of workers daily. It witnessed robust activities throughout the 1980s.

During the 1990s the ship-breaking activities at Gadani started to slowdown, fluctuating heavily from year to year, due primarily to inconsistent policies and abrupt changes in the import duties by the successive government. Despite the slowing down of activities and the highly inconsistent performance, a total of 389 vessels with a collective Long Displacement Tonnage (LDT) of over 5.7 million tons were scrapped at Gadani between 1993-94 till June 30 this year. The ship-breaking activities at Gadani has contributed over Rs 22 billion of taxes during the ten years ended June 30 this year. Please see the table attached.

Inconsistent policies, abrupt changes in duty and other taxes on the import of vessels imported for scrap and most of all a general negligence to accord ship-breaking, the importance that it deserves are some of the key factors to disrupt ship-breaking activities at Gadani the benefit of which is taken by such competitors in the region as China, India and Bangladesh.

However, the arrival of Sea Giant, a 1979-built supertanker, at Gadani last week has given the Pakistani ship-breaking industry the much needed shot-in-the-arm. The Sea Giant was the biggest ship in the world when it was built in France 24 years ago and was still the second biggest vessel at the time of its arrival at Gadani. It has a Dead Weight Tonnage of just over 555,000 tons and LDT of 74,000 tons. It is the biggest ship ever to be scrapped at Gadani and the sense of jubilation in the ship-breaking circles is all too pervading.

Does the arrival of Sea Giant would mean revival of the stagnating ship-breaking activities at Gadani to help it reclaim its past glory? Would it help supplement the growing demand for steel products in the country of which ship-breaking is a vital source in addition to Pakistan Steel and re-rolling mills.

PAGE talked to Muhammad Akhlaque Memon of Usman Enterprises, the company which has imported the vessel. Akhlaque expressed optimism that the sailing of Sea Giant into Gadani would definitely give a boost to the ship-breaking industry both in terms of morale and increased imports and activities at the yard. He informed PAGE that it would take around six months to scrap the ship and another one year to sell the steel scrapped from it. "It would provide jobs to 300 workers a day during the period of the scrapping."

Just how much steel would be scrapped of Sea Giant, PAGE asked Akhlaque. "Though the quantity of steel scrap differ from vessel to vessel which compromises other materials as wood, china, plastic, rubber, etc., on an average 97 per cent of the LDT comprises steel, all types of steel."

Thus, the Sea Giant with a LDT of 74,000 tons would be able to provide an additional 71,000 tons of steel the local demand for which stands around 2 million tons at present. "The biggest portion of the steel demand in the country is fulfilled by the re-rolling mills, which provide 1 million tons or about half of the total 2 million tons of the demand. The rest of the demand is met by the Pakistan Steel Mill which provides around 400,000 tons of the steel products while ship-breakers provide around 200,000-250,000 tons."

The supply of steel products in the country falls short of the demand by as much as 350,000 tons due primary to decreased ship-breaking activities on the one hand and depressed demand on the other. In addition, the rising prices are also attrributed for depressing the demand.

Asked if the arrival of the second biggest ship in the world at Gadani would help boost the ship-breaking activities, Akhlaque said that it has certainly given the industry a big boost as six vessels are already berthed at Gadani while another two- a 21,000 and 16,000 LDT vessels imported by other entrepreneurs would soon be arriving at the yard.

The chairman of Pakistan Ship-breakers Association, Chaudhary Abdul Majeed, said that during the first two months of the current fiscal ended last August 31, Gadani has already scrapped vessels whose collective LDT was 200,000 tons. "We expect to scrap a total of 700,000 LDT tons during the current fiscal."

He appreciated the reduction of sales tax and withholding tax by 6 per cent to 14 per cent and 6 per cent to 3 per cent as a special case recently by the government adding that it help Gadani to regain some of the grounds already lost to other competitors in the region. "The demand for steel and products are rising in the country and has already risen from 2.3 million tons to 3 million tons annually and reducing the sales and withholding tax would help make imports of vessels more attractive by cutting the amount of duties and taxes considerably which currently stands at around Rs 4,500 per ton."

Year

No. of Ships

Tonnage (LDT)

Total Taxes (Million of Rs)

1993-94

38

456,189

1,433.736

1994-95

50

977,170

2,667.362

1995-96

33

649,013

3,334.372

1996-97

24

418,011

2,342.758

1997-98

51

620,914.36

2,472.041

1998-99

54

925,392.98

3,493.819

1999-00

35

530,769.42

2,506.453

2000-01

25

182,568.14

1,158.62

2001-02

39

773,633.914

2,388.318

2002-03

40

205,771.917

649.700

Source: Pakistan Ship-breakers Association