How the shipbreaking industry has maintained its global market leadership for 9 years

In 1960, the Greek ship 'MV Alpine' ran aground off the coast of Sitakunda due to a tidal surge. For nearly five years, it remained stranded on the shores of the Bay of Bengal, until it was finally salvaged by Chittagong Steel House for dismantling. 

Later, during the Liberation War in 1971, the Pakistani ship 'Al Abbas' suffered damage from a bombing. After its recovery, it was transported to the Faujdarhat area in Chattogram, where Karnaphuli Metal Works Limited began dismantling it in 1974.

These incidents marked the birth of Bangladesh's shipbreaking industry, which has since evolved into a significant sector, with Chattogram emerging as a major hub for dismantling large ships from around the globe. Since 2015, Bangladesh has even secured the top position in this industry, outpacing other countries in Europe, US, and South Asia.

Several factors have fueled Bangladesh's rise in shipbreaking. 

The establishment of designated zones for the industry, a growing demand for steel driven by infrastructure projects and a strong reliance on shipbreaking for raw materials have all played pivotal roles. 

This expansion has led to the development of heavy industries in the Sitakunda region, significantly benefiting the Bangladesh economy. Additionally, the country's relatively lenient environmental regulations have further facilitated the industry's growth.

According to the Belgium-based NGO Shipbreaking Platform, the shipbreaking industry that took root in Chattogram during the 1980s has maintained its leadership position since 2015. That year alone, Bangladesh imported 194 ships for dismantling, totalling a remarkable 6,759,633 tonnes. 

During the same period, India also imported 194 ships, amounting to 4,523,347 tonnes, while Pakistan brought in eight ships, weighing 3,731,532 tonnes. 

By 2019, Bangladesh's imports had increased to 236 ships, with a total weight of 7,849,569 tonnes.

The sheer volume of activity is impressive, as the majority of large ships are dismantled along the Sitakunda coast. In 2021, out of the 20 massive ships dismantled worldwide, 14 — approximately 70% — were sent to various yards in Sitakunda, while the remaining six were dismantled in India, Pakistan and Turkey.

According to the Bangladesh Steel Manufacturers Association (BSMA), steel production in the country's factories was around 1.6 million tonnes before 2010. Today, that figure has surged to approximately six million tonnes. 

The industry has seen the establishment of around 250 small and large factories, creating jobs for nearly 500,000 people. Currently, there are over 120 steel re-rolling mills, both semi-automated and manual, producing a combined total of 11 million tonnes of steel annually.

A decade ago, per capita steel consumption in Bangladesh was just 25kg; it is now estimated to be around 47kg. This nearly doubling of steel consumption highlights the country's progress in infrastructure development. 

Current investments in the sector exceed Tk50,000 crore, reflecting a fourfold increase in production.

Over the past decade, significant infrastructure projects have transformed Bangladesh, including the Padma Bridge, metro rail, Bangabandhu Tunnel, road networks, bridges and rural infrastructure. Steel has been a crucial construction material for these initiatives, reinforcing the steel industry's position in the economy. 

The country's GDP growth rate has reached an impressive 7.86% over the same period. Notably, half of the raw materials needed for the steel industry are sourced from the shipbreaking sector, which has expanded to meet this growing demand.

Large steel manufacturers often import scrap from abroad, while some factory owners operate their own shipbreaking facilities. In contrast, small and medium-sized factories depend heavily on the shipbreaking industry for their raw materials.

Industry owners assert that both the steel and shipbuilding sectors rely on shipbreaking. Plates from decommissioned ships are used to construct inland vessels and other internal ships. 

Moreover, the shipbuilding industry depends entirely on paint salvaged from old ships. There's also a robust market for pipes, furniture, motors, engines and electronic goods recovered from old vessels in the Sitakunda area of Chattogram.

A 2016 report titled "Safe and Environmentally Sound Ship Recycling in Bangladesh – Phase I," published by the International Maritime Organization (IMO) and the Bangladesh government, highlighted the ship recycling industry's significant contribution to the economy. Between 2011 and 2015, the industry generated an average of Tk5,330 crore ($770 million) annually, while also paying over Tk500 crore ($68 million) in taxes and duties each year, providing substantial revenue for the government. 

In 2015, the value of recovered materials such as pipes, chains, and anchors was estimated at Tk760 crore ($111 million).

According to the Bangladesh Ship Breakers and Recyclers Association (BSBRA), there were once 160 shipyards along the Sitakunda coast. However, by 2019, that number had dropped to 90 due to various factors, including price fluctuations in both domestic and international markets, excessive imports compared to demand, political instability and a downturn in the housing sector. 

Following Covid-19, nearly 30 factories closed due to rising raw material prices in the global market. The recent dollar crisis has forced another 40 yards to shut down due to difficulties in importing raw materials. 

Currently, only 30 to 35 yards are operational, both formally and informally. Once the Hong Kong Convention comes into effect in July 2025, it is anticipated that only about 20 environmentally friendly shipyards will remain in operation.

Zahirul Islam, a director of PHP Family and vice president of BSBRA, stated in an interview with The Business Standard, "The shipbreaking industry has emerged due to mega projects and the expansion of the construction industry. Moreover, the country's steel industry heavily relies on shipbreaking. Our neighbouring country, India, has domestic sources of scrap and iron, so they do not have to rely on shipbreaking."

He added, "Large steel producers in Bangladesh import millions of tonnes of scrap or ships at once, but small producers do not have that capability. They typically collect 30 to 50 tonnes of raw material scrap daily from shipbreaking yards. There are also no complexities in letters of credit (LC) or bank loans, which increases the steel industry's dependency on shipbreaking. These factors have contributed to the expansion of the shipbreaking industry in Bangladesh."