Vol. 5 Num 317 Mon. April 18, 2005  

Ban on oil tanker may boost local ship breaking sector

A United Nations ban, with effect from April 5, on oil tankers that use a single layer of steel to separate their cargo from the sea is likely to hit the local ship breaking industry easing the price of mild steel (MS) rod.

According to the UN rule, all single-hulled ships will have to stop sailing by 2010.

The UN's International Convention for the prevention of pollution from ships was amended to accelerate the phase-out after a ship sank off the coast of Spain in November 2002 while carrying 77,00 tonnes of fuel oil.

Ship owners must scrap 169 tankers with a combined capacity of about 6.9 million tonnes, this year or 2.1 percent of this year's global capacity.

By 2010, as many as 1402 ships carrying 104.6 million tonnes, or a quarter of global tanker capacity, would have to be scrapped, according to a report issued by the London-based ship broker EA Gibson on Friday.

Most of the ships abolished under the UN rules will be dismantled on beaches of Bangladesh and India, the world's two largest markets for ship scraps.

Industry sources said local ship breaking industry is expecting some 25 crore tonnes of ship scraps in the country within 2010 because of the UN rule.

Ship scraps are the main source of MS rod in the country.

In 2003-04 fiscal, 100 ships weighing 120,000 tonnes were imported against 95 ships weighing 1,172,339.53 tonnes in FY2002-03.

Ship breakers are not happy with the UN rule whereas the steel millers and re-rolling millers are excited with the rule because of the rising steel costs. They are expecting a relief with the steel cost.

Zahirul Islam, managing director of Al-Mukiddem Steel Mills Ltd, welcomed the UN rule terming it a 'blessing'.

He alleged that the ship-breaking industry seized the power of fixing price of steel and rod.

"We used to buy per tonne of steel that comes from round and flat bars of the ships for Tk 28,000 last week but on Wednesday ship breakers has increased the price to Tk 31,000," said Sheikh Masadul, secretary general of Bangladesh Steel Mills Association and Re-rolling Mills Association.

Ship breakers rejected the UN decision.

"If we reject the UN rule what will they do? We will stop ship breaking," said Mohammad Mohsin, who is the managing director of PHP Ship Breaking and Recycling Industries Limited.

He said it will create an overflow in the country's ship breaking yards.