Small, medium shipbreakers face contraction in revenue: CRISIL SME Tracker

As labour availability improves, yard utilisation is expected to increase over the medium term from the current 30-35 per cent.
CRISIL Research expects the small and medium enterprises (SMEs) that account for 90-95 per cent of the shipbreaking industry in India to see revenue contract by a third in the current fiscal year, owing to weak capacity utilisation, low labour availability, and fewer ships being scrapped on account of the Covid-19 pandemic.


In the last fiscal year, Indian shipbreakers saw revenue decline amid growing competition from Bangladesh and a positive turn in global trade, which led to fewer ships being scrapped.


Shipbreaking volumes are expected to remain under pressure in the current fiscal year too, following the pandemic-induced lockdowns that stalled activity for almost three months.


Lower steel scrap prices are also expected to impact revenues. The market size and volume of ships broken has logged a five-year compound annual growth rate of -22 per cent and -9 per cent, respectively, until fiscal year 2020.


The Alang cluster accounts for 90-95 per cent of the sector in India by both volume and value.


Also, this is a labour-intensive industry, and the high share of migrant labourers that went back to their respective states during this period has only added to the pressure.


That said, as labour availability improves, yard utilisation is expected to increase over the medium term from the current 30-35 per cent.

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