May create a vacuum in the steel industry

May 17 - 23, 2004

The ship breaking industry, which is a major contributor to the economy by meeting half of the steel requirement of the country, has been rendered almost paralyzed due to non-availability of the ships in the international market and the high taxation rates.

The hopeless condition is revealed from that is the fact that the industry was unable to import even a single ship during last six months. Currently, only 10 ships are embarked at the Gaddani beach and it is feared that after they were scrapped, the current labor force around 3000 would have to seek another source of their earnings.

Ship breaking which is a significant source of supply of steel, if dried up, may create a vacuum in the steel industry as the organized sector like Pakistan Steel hardly meet one-fourth of the total steel demand of the country.

Although the government had reduced imported duty for re-rolling mills, yet the ship breaking sector was given no relief which is again causing hardships for the industry.

Ship breaking sector, which was a second largest ship breaking yard in the world during 1980s when over 40,000 workers used to work at a time, was now near to an ugly end leaving thousands of workers jobless.

Gadani, the biggest ship breaking place near Sindh-Balochistan province border that had hundreds of oil tankers being scraped now has only eight to ten small oil tankers. For the last six months Gadani has not received any ship for scraping.

Greek Oil Tanker, Kapetan Michalis the largest ever ocean-going vessel was the last good job for Gadani, Pakistan Ship Breakers Association said.

Gadani may not have any other ship for scrapping as China has virtually swept in all the oil tankers and cargo ships during last one year. Gadani came into a ship breaking yard in early 70s last and within a decade or so that climbed up to second largest ship breaking yard of the world and Taiwan stood on top. In early 80s India started ship breaking followed by China.

China is building four major dam projects besides developing an Olympic city. In order to meet the requirement for building up these mega projects China has swept the entire market not only by lifting the scrap ships by the steel products from the international market which is again a major factor increase in the steel prices all over the world.

Pakistan Steel which produces around 1.1 million tons of steel products is currently striving for capacity expansion is likely to expand production capacity to 1.5 million tons in the first phase. Later on it has to expand the capacity to 4 million tons but by the time it reaches the goal, the requirement of the country would also increase. This calls for more investment in the steel sector. Currently, a Saudi Group has been allowed to set up a steel mill with a capacity of one million tons right adjacent to the Pakistan Steel. Hopefully, when these projects completed, will sufficiently cater to the steel requirement of the country. In order to raise funds for its expansion plan, the Pakistan Steel is also planning to make its shares public through Karachi.

Chairman Pakistan Ship Breakers Association, Mohammed Akhlaq, who also scraped out largest ever Greek Oil Tanker Kapetan Michalis in November 2002 last said that ships price have gone out of the reach of local ship breakers while iron and steel cost remained almost the same. Apart from China's aggressive jump into the ship breaking industry the freight rates of cargo and oil tankers have gone to more than double that is the most attractive aspect for shipping companies to keep their even old vessels in sailing fleet and earn more than what they could get from ship breakers. Mohammed Akhlaq said that old ships were being repaired to keep them in running condition to earn through freight charges of oil and dry cargo.

One of the another major set back to the ending ship breaking industry is 20% sales tax, 10 percent custom duty and three percent advance income tax, this attitude is giving fuel to the burning ship breaking industry of Pakistan.

Pakistan ship breaking industry provided 25,000 job to the different kind of laborers during 80s when it was in full swing, but now only 3,000 people are working in single shift.

India and Bangladesh started ship breaking in mid 80s, but improved remarkably by the support of Government despite the fact that Pakistani workers are more talented and hard workers.

The ship which takes a year to be scraped out in India that is completely scraped out in a month in Pakistan. The government would have to take remedial steps for the revival of this important industry which occupies the Gaddani Ship Breaking Yard for the last 40 years. It is most important local and the potential of this location more productively is going waste because of stagnant economic activity on this yard. Either the government should take steps for revival or the economic managers should think over the productive utilization of Gaddani beach which can be a significant contributor to the economy of the country