Post slowdown, recycling of ships zooms at Alang

The recession swept in. Cargo traffic sank. Ship capacity went largely under-utilised and freight rates fell. The biggest beneficiary of this tempest seems to be India's ship recycling industry. As shipping companies try to balance the low freight rates and a muted cargo growth with excess capacity, ship owners across the world are taking a different course: they are getting rid of excess capacity, especially if ships are old. Also, factor in the International Maritime Organisation's missive that all single hull cargo ships will have to move to double hull cargo ships and ships over 25 years will have to face the axe by December 2010. (A double hull ship will have two layers at the bottom as a safety measure. In case the first layer is damaged, the second hull will prevent water seepage and protect the ship.)
This has meant that the shipyards at Alang in Gujarat today has about 166 ships to recycle. Alang recycles nearly half of all ships salvaged around the world. "Recession has played a big part in many ships being sent for recycling this year.... Shipping companies are sending their old ships for recycling as they are not finding any operational value in it," Vishnu Kumar Gupta, president, Ship Recycling Association of India, told The Times of India. "We will finish the 2010 fiscal with more than 300 ships." In the 2009 fiscal, about 260 ships were recycled.
Many of the ships sailing in to be broken are from countries like Germany, Japan and South Korea. According to a Fitch report, about half of the cargo ships under the Indian flag are likely to be decommissioned this year to meet the IMO directive. "The older age of ships is also a factor contributing to the necessity for further capex," the report said.