The ship breaking industry has witnessed an increase in the supply of ships to be scrapped due to the global shipping downturn coupled with weak macro economic head winds since 2009, ICRA said in a report.
India, with its natural geographical advantage of a high inter-tidal gradient, favourable weather conditions and low manpower costs, has emerged as a leader in terms of both volume and number of ships broken.
Also, the less stringent regulations related to environment and human health hazards has also aided to the growth of this industry.
With the outlook on international shipping freight rates being subdued over the near to medium term and large tonnage expected to come on stream post 2012, the ship breaking industry is expected to continue witnessing a steady supply of vessels for demolition over the medium term, the report said.
K. Ravichandran, senior vice president and co-head, corporate ratings, said, “Regulatory risk remains high for the ship breaking business. The Supreme Court of India has recently passed an order requiring stricter implementation of ship breaking norms in view of the environmental and health hazards. This as well as any other proposed regulation could entail event based risks for Indian ship breaking operators’ and may affect their competitiveness against players in other competing countries.”
