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Shipyard

• Ship Building
• Ship Breaking
• Ship Repair

Ship Building

Global Shipbuilding is estimated to be a USD 20 billion industry and is presently dominated by Korea, Japan and China, which together account for around 75 per cent of the world output.

Fortunes of shipping and shipbuilding industries seem to be linked to each other or at least move in tandem. For nearly three decades in the post World War II era, both the industries were dominated by European nations and United States. However, high labour costs in the yards of Europe and USA, one of the major determinants in this cost competitive industry, has led to a gradual shift of the center of shipbuilding to these Asian nations over the last two decades.

Similar progress was observed in Indian shipbuilding industry, as per the research carried out by i-maritime Consultancy the orderbook of the Indian shipyards, which was hovering around Rs 1,500 crore in 2002, has reached a value close to Rs 13,700 crore by September 2006, with nine times increase in just four years. The Indian shipbuilding, which was totally domestic till late 90’s has become export oriented. ABG Shipyard was the first to build and export a newsprint carrier for a Norwegian client in 2000 and established India’s competitiveness in building and delivering ships of the international standards. Today six years down, out of the 199 ships on the orderbook, close to 124 are for exports.

India has a long history and tradition of shipbuilding that can be traced back to the Harappan civilisation. However, since the beginning of the 20th century, it had been on a declining scale and presently, rated capacity of country's shipbuilding yards is minuscule vis-à-vis world's capacity.

Indian shipyards remain largely insulated from the present boom in shipping and shipbuilding. Hindustan Shipyard Limited and Cochin Shipyard Limited, two of the country's largest shipyards, have got only one order each - a Handymax and an Aframax vessels respectively. Both their orders are from Shipping Corporation of India, a public sector unit and many market participants believe that the above is not a result of economic consideration.

However, Indian shipowners have gone forward and placed sizeably large orders with foreign shipyards. SCI has placed order for 4 Aframax with Hyundai Shipyard, which is due for delivery in 2003. Great Eastern Shipping has placed order for 2 Aframax vessels, one each with Samho Shipyard and Samsung Shipyard and is also planning to place an order for one more Aframax with a foreign shipyard. The lack of commitment, cost overruns, poor quality constructions, delayed delivery, etc. has debarred the Indian shipyards from getting a significant volume of orders.

However, some private sector yards are showing increasingly better performance. ABG Shipyards, one of the leading private sector shipyards of the country, has recently executed an order of newsprint carriers for Norway-based Lys Lines and got another order of delivering five 10,000-dwt dry cargo vessels from a German shipowner. Both Norwegians and Germans are known to demand the best of quality products.

Looking at the prospects of Indian shipbuilding industry, it has been observed that cost competitiveness remains the significant advantage of domestic shipbuilding industry considering the two major parameters of shipbuilding viz. steel fabrication and labor. China is emerging as a major shipbuilding nation leveraging on these advantages and posing serious threats to Korea and Japan. Considering this, it can be said that a proper strategy taken in the right direction could leverage the competitive benefit and lead the Indian shipbuilding industry towards better prospects.

Ship Breaking

Ship breaking or ship demolition involves breaking up of aged ships for scrap.

Ships purchased on the basis of their light displacement tonnage (LDT) are demolished in ship breaking yards and sent to steel re-rolling mills for reuse as raw material for production of steel. Currently, the international ship demolition market is centered around the Indian subcontinent. While a large number of tankers find their way to scrap yards in Pakistan and Bangladesh, Indian ship breaking yards attract mostly dry and general cargo vessels.

Ship breaking industry in India is mostly concentrated at Alang in Gujarat, which is the world's largest ship breaking yard catering to nearly 90 per cent of India's ship breaking activity. However, sporadic activity also takes place in other locations like Sachana, Gujarat, Mumbai and Calcutta. The ship breaking activity at Alang includes a total of 170 yards of which 50-70 are operational and around 50,000 people are involved directly or indirectly in the business of scrapping. The total tonnage of ships broken in India has varied from a low of 0.65 million ldt in 1991-92 to a high of 2.79 million ldt in 1997-98. Financing is an important aspect of the industry as scrapping normally involves an intermediary 'cash buyer'. Earlier State Bank of Saurashtra and Dena Bank took active role in the ship breaking industry, however, of late, most banks have become reluctant to finance ship scrapping projects.

Ship scrapping industry in India suffers from government apathy. In spite of the fact that re-rolling accounts for about 60 per cent of the national production of bars, rods and structural and ship scrapping supplies nearly 200,000 tons of scrap every year to the re-rolling mills, the sector remains largely disorganized as well as unrecognized.

In the recent past, the ship scrapping industry attracted considerable attention on the issues relating to environmental pollution, health problems of labour and violence of human rights. Environmentalists across the world particularly Greenpeace and Basel Action Network have drawn international attention to the poor working environment prevailing at the Indian ship scrapping yards particularly at Alang and opened up fronts everywhere by calling for legal action against scrappers, building up public opinion against scrapping and physically blocking the ships meant for scrapping. The environmental issue could become the single largest factor that could determine the structure of the ship breaking industry in future.

Looking at the prospects of the ship breaking industry in India it has been observed that competition from neighboring countries is expected to become tough in the near future. China has also come back to the scrapping industry in recent years with a bang by capturing a significant volume of tonnage sent for scrapping. Pakistan and Bangladesh are likely to pose serious threat to Indian ship scrapping yards. Considering all the hurdles faced by the Indian ship scrapping industry, ample scope for improvement has remained and Indian ship scrapping industry is expected to take all possible actions to keep the industry vibrant.

Ship Repair

Ship repairing is a service, consisting of a number of smaller services on various parts and components of the ship. While the repairing activity is adjunct to shipyards and ports, the extent and complexity of these services vary.

Ship repairing in India started long back. The first dry dock was built at Bombay port in 1750 and second at Calcutta port in 1781. For about two decades immediately after the Independence, the Indian ship repair industry made a booming business. The potential size of the ship repair industry in India is around Rs. 44 billion, which includes repairing required by Indian and foreign vessels calling at Indian ports. However, only a small percentage of this business equivalent to Rs 10-12 billion is executed by the Indian ship repairing industry.

In India, major shipyards carry out both ship repair and ship building activities. The industry is controlled by 10 large and 30 to 40 medium and small sized shipyards apart from Naval Dock yards and Defense shipyards. The attempts to set up exclusive ship repair facilities in the private sector failed to perform.

With the growing fear of pollution and stricter norms and regulations, ship repairing services are in demand. Indian shipyards have the competitive advantage like low labor costs, availability of trained and skilled labor force and proximity to international shipping routes required for getting success in the business. However, the industry is in a dismal state, not withstanding such advantages and has not been able to cater to the needs of the Indian merchant fleet adequately due to following reasons.

• Lack of new investments in machinery / equipment
• Deterioration of existing machinery / equipment
• Usage of obsolete methods and systems
• Lack of suitable training for upgradation of skills
• Life emphasis on professional management techniques
• Supply bottlenecks for raw materials and spares
• Over dependence on public sector
• Cumbersome government procedures
• Extremely low labor productivity

While there has been success in the field of ship breaking and ship building industry in India both of which are labour intensive, ship repairing industry can also replicate the scenario provided it utilises its inherent competitive advantages to the maximum

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