Pandemic, increased tax led to 11.50% fall in arrival of old ships, key source of raw materials for Bangladesh’s steel industry
Bangladesh saw import of scrap ships declining in 2020 due to pandemic and higher rates of tax, causing concern about raw material supply to local steel mills.
Shipbreaking yards dismantled 144 rundown ships last year and got 69.47 lakh tonnes of scraps. In 2019, 236 ships were dismantled in Bangladesh for 78.50 lakh tonnes of scraps, while the country broke 185 ships in 2018.
In spite of the decline in imports, Bangladesh still topped in dismantling ships in 2020 – for the fourth year in a row.
Some 630 ocean-going commercial ships and offshore units were sold to the scrap yards in 2020. Of these vessels, 446 large tankers, bulkers, floating platforms, cargo and passenger ships, amounting to nearly 90% of the gross tonnage, ended up on tidal mudflats on the beaches in Bangladesh, India and Pakistan.
Even though India dismantled 203 ships last year, it fell behind Bangladesh as it got 45.16 lakh tonnes of scraps after breaking those ships. Pakistan secured the third position, dismantling 99 ships for 22.57 lakh tonnes of scraps.
The NGO Shipbreaking Platform – a coalition of environmental, human and labour rights organisations campaigning for clean and safe ship recycling – released the data on Tuesday.
Turkey dismantled 94 ships for 16.24 lakh tonnes of scraps, China dismantled 20 ships for 2.16 lakh tonnes of scraps, European Union dismantled 32 ships for 1.28 lakh tonnes of scraps, and the rest of the world dismantled 38 ships for 1.61 lakh tonnes of scraps.
Bangladesh witnessed an 11.50% fall in imports of rundown ships in terms of gross tonnage year-on-year in 2020.
Dismantling of a fewer number of old ships would mean a decline in raw material supplies to steel mills, which may cause local steel market volatility.
Mohammad Zahirul Islam, managing director of PHP Ship Breaking and Recycling Industry Ltd, noted that the main reason behind the fall in imports is the Covid-19 pandemic. "The business remained almost closed from March to June last year. Although the industry is turning around recovering from the pandemic, it is yet to return to normalcy."
When contacted, Md Abu Taher, president of Bangladesh Ship Breakers Association (BSBA), however, told The Business Standard the levying of advance tax (AT) and a hike in value added tax (VAT) in the national budget for the 2019-2020 fiscal year was what mainly caused the import of ships to decline. "The pandemic also played a big role, as it induced closures of shipbreaking yards."
In the last fiscal's budget, the government imposed 5% AT and raised VAT to Tk1,000 from Tk300 on scrap sale, maintained Abu Taher and Zahirul Islam.
In 2020, 10 workers lost their lives and 14 were severely injured while working at the shipbreaking yard on the Chattogram beach.
In the previous year the NGO platform has recorded 24 workers' deaths in accidents on the beach of Chattogram, making 2019 "the worst year for Bangladeshi yards in terms of fatalities since 2010. At least another 34 workers were severely injured in 2019.
In ship-breaking yards across the country, 11 workers died in workplace accidents in 2010, seven in 2011, 21 in 2012, 11 in 2013, nine in 2014, 16 in 2015, 17 in 2016, 15 in 2017, 18 died in 2018.
Mohammad Ali Shahin, coordinator at Youth Power in Social Action (YPSA) – a non-government development organisation working on shipbreaking, said most of the shipbreaking yards in the country do not have the compliance certificate. This causes a rise in the number of fatalities, he observed, adding that being the number one importer of scrap ships, Bangladesh cannot take pride in this.
"If we become a 100% compliance country in terms of shipbreaking, we will be proud of it. The death of even 10 people amid the pandemic is a matter of concern. We recommend environment-friendly and green shipyards."