How ship-breaking helped shape the steel industry

Bangladesh's annual production of steel rods stands at an impressive 6 million tonnes at present, and around 80-90% of the raw materials for this are sourced from the ship-breaking industry. This sector has played a pivotal role in propelling the growth of the country's steel industry.

Usually, around 95% of a ship consists of mild steel, while 2% comprises stainless steel, and the remaining 3% constitutes mixed metals, which serve as crucial raw materials for several sectors. A major part of the raw material required for the production of rods used in construction comes from this industry.

According to the Bangladesh Ship Breakers and Recyclers Association, which represents shipbreaking yard owners, there are 151 registered yards, with 60 parent companies under the association. As of July 2021, there were 30-35 ship-breaking yards operating in the country.

Data shows that from FY2001-02 to FY2020-21, Chattogram shipyards imported a staggering 3,329 scrap ships. These ships have contributed to more than 3.76 crore tonnes of scrap that have been processed in Bangladesh so far.

Situated on the north coast of Chattogram, at locations such as Sitakunda and Faujdarhat, the world's largest ship-breaking industry spans an impressive 11 km. These ship-breaking yards serve as the ultimate destination for old, damaged, unseaworthy, unserviceable and irreparable cargo ships or oil tankers. One-quarter of the world's scrap ships are dismantled in these ship-breaking yards.

The origins of this industry in Bangladesh can be traced back to the 1980s. It began its journey slowly, driven by the advantage of low labour costs and the subsequent surge in demand for iron in the country's various industries.

On 30 October 1960, a catastrophic cyclone struck the coastal districts of Chattogram, Noakhali and Patuakhali, claiming the lives of around 10,000 people. During this devastating event, the Greek ship MV Alpine became stranded in the coastal area of Sitakunda.

The Chattogram Steel House took the initiative to purchase the ship, with the support of locals, and proceeded to dismantle it. The machinery and metal parts salvaged from the ship were then sold in the market, marking the inception of ship-breaking activities in the region.

However, it was much later that commercial ship-breaking activities were formally established. During the 1971 war of independence, the ship named Al Abbas belonging to the Pakistanis suffered damage. After the war, Karnaphuli Metal Works acquired this ship from the Bangladesh government, and as a result, the ship-breaking industry began to flourish in Faujdarhat. In 1974, Karnaphuli Metal Works commenced regular commercial operations of breaking domestic and foreign ships in this region.

Throughout the 1980s, the shipbreaking industry progressed slowly, but the momentum of investment started to gain strength in the 1990s. Entrepreneurs based in Chattogram and Dhaka saw an opportunity to earn significant profits, as they realised the potential of earning two to three times the initial capital investment per ship.

Additionally, the shipbreaking industry emerged as a crucial supplier of raw materials, effectively meeting the escalating demand for steel within the country.

Being a developing third-world country with a high population density, an abundant workforce was available at lower wage rates. Coupled with the country's burgeoning need for steel to support its development, the shipbreaking industry continued to thrive unabated. Consequently, this industry has consistently been recognised as a boon for the country's economy.

About 30 industrialist families control the shipyards in Chattogram. The Bangladesh government has announced a separate pay structure for shipyard workers, but this has not yet been implemented due to various complications. The availability of cheap labour has played a major role in the development of this industry.

Consumer goods traders from Chattogram's Khatunganj began investing in the shipbreaking industry in the late 1990s. This investment led to the construction of more than 160 shipyards in the Sitakunda-Mirsarai zone of Chattogram. However, after 2010, many of these shipyards began to close due to rising interest rates on bank loans, and the inability to compete in the international market.

At present, 30-35 shipyards are operating in this industrial zone. Some of these shipyards are running on a subcontract basis. Many of the big bank loan defaulters in Chattogram are involved in this business.

Presently, the shipyards are undergoing a process of modernisation under the guidance of the Bangladesh government. With the aim of averting environmental disasters and ensuring the safety of workers, the government has mandated the transformation of all shipyards into green shipyards by 2023.

In a pioneering move, the shipyard of PHP Group has already achieved the status of a green shipyard, marking a historic milestone in the country's ship-breaking industry. Furthermore, numerous other shipyards are actively working towards converting themselves into green shipyards.

At present, Bangladesh stands at the top position in the shipyard sector on the global stage. Despite this, international environmentalists have raised concerns about traditional ship-breaking yards in the country on multiple occasions. The conversion of a regular ship-breaking yard into a green ship-breaking yard requires a substantial investment of at least Tk250 crore.

Unfortunately, most shipyard owners in Bangladesh are unable to bear such a financial burden, making it challenging for them to initiate the necessary changes. To address this issue, stakeholders say, the government must offer significant incentives to sustain the shipbreaking sector.

Moreover, there is a looming uncertainty about the sector's standing in the international market if the country fails to establish green ship-breaking yards. In response to this concern, businessmen and stakeholders have advocated for a combination of bank loans and government incentives to facilitate the transformation of regular yards into environmentally friendly ones.

The industry is highly polluting and harmful to workers, and many countries have turned away from it in favour of shipbuilding.

In the past, many developed countries, such as Taiwan, China, Spain, South Korea, Italy and Croatia, were major players in the shipbreaking industry. However, due to the environmental and health risks associated with the industry, these countries have gradually phased it out. By 2008, production in these countries had declined significantly.

On the other hand,  the production of scrap metal from ships has increased in less developed countries such as Bangladesh, India and Pakistan. 

Since the 1980s, the industry in Bangladesh imported more than 25.33 lakh tonnes of scrap ships from different countries. The shipbreaking industry in Bangladesh now accounts for about 47.2% of the international recycling market.