Weak rupee, hostile local market: Pakistan unable to exploit ship breaking industry's boom

A weak currency and an un-supportive local market are not allowing the Pakistan ship breaking industry to exploit the trickledown benefits of global financial crisis, which has convinced the shipping lines world over to get over 1000 of their aging vessels scrapped during this year.
Witnessing a sharp revival last year, from September 2008, the ship breaking industry in Pakistan, the world's third largest ship breaking hub after Bangladesh and India, claims to have been unable to exploit the financial meltdown that proved to be a zero-sum game for the ailing industry as it convinced the owners to get rid of their old vessels instead of going for the mandatory, but extravagant, dry docking.
According to sources the crisis-hit international shipping firms were all set to get over a thousand of their vessels scrapped during 2009, a trend, which had convinced the countries, like Turkey and China, to start developing the future-lucrative industry on their soils.
Since September 2008 at least 95 breakable ships, weighing around 0.75 million tones, had arrived at Gadani, Balochistan, where the business had come to a complete halt just three months ago in June, they added.
The revitalising boom, however, could not please the local ship breakers, who complain that factors, like a depreciating rupee against the dollar, recent $50 increase in the $250 per tonne price of breakable ships and low demand for steel products in local market, had eroded their capacity to offer competitive rates to the sellers.
Commenting on the issue Chairman Pakistan Ship Breakers Association (PSBA) Dewan Muhammad Rizwan Farooqui said a weakening rupee, fading demand and downward trend in the local prices of scraps had caused the slump. "The local market is in pressure, as the last 20 days marked a decrease of four to five thousand rupees in the prices of per tonne sarya (steel bar)," the PSBA chief told Business Recorder.
He said the demand of iron, non-ferrous, high quality wood and machinery, like boilers, generators, pumps etc, was also low in the local market. Asked if the global financial crunch had influenced Pakistan negatively, Dewan said it was nominal. "We are number three not number one, therefore, the impact was almost nothing," he added.
The sources, however, caste doubt in the capability of Pakistani ship breakers to achieve the level of competitiveness possessed by their competitors from Dhaka and New Delhi. "We can not compete with India and Bangladesh as so far the per tonne price of a breakable ship was ranging between $250 and $275, which has now shot up to $300," they said.
They said a dollar, which values around 70 rupees and 68 taka respectively in India and Bangladesh, was worth 82.50 rupees in Pakistan. "Due to supportive local markets Bangladesh and India are offering $350 per tonne to the parties (ship sellers)," they said.
They said the recent $50 hike in scrap able ship price had increased the cost of production for ship breakers whose' buying at around Rs 40,000 were surpassing the rates (Rs 36,000/tonne) for their produces in the local markets. On the other hand, the per tonne price for ship breakers' products in India and Bangladesh stood at Rs 38000, said the sources.