The Indian ship recycling industry is expected to see revenue grow 15% this fiscal after two years of decline [22% in FY24 and 8.5% in FY23], Crisil Ratings said in a study.
The growth will be supported by increased availability of ageing vessels for recycling due to addition of new vessel capacity globally and higher competitiveness of Indian ship recyclers compared with key rivals in Bangladesh and Pakistan, it said.
Nitin Kansal, Director, CRISIL Ratings said, “The addition of ship freight capacity for container and dry-bulk fleet globally will bring down the freight rate over the medium term. In fact, container fleet capacity alone is expected to increase 10% this fiscal.”
“The lower freight rate will make ageing vessels operating beyond their age limit uneconomical due to high repair and insurance cost which in-turn will lead to increase in vessels available for dismantling globally,” he added.
Indian ship recyclers are expected to grab a lion’s share of the increased volume of condemned vessels, given their higher competitiveness leading to likely volume growth of around 20-23%, the rating agency said.
Nilesh Agarwal, Associate Director, CRISIL Ratings said, “With higher revenue and improved profitability, the cash flow of ship recyclers rated by CRISIL Ratings is expected to increase 20% this fiscal.”
“Moreover, absence of capex as yard capacity utilisation will remain around 50%, along with healthy balance sheets, will keep credit profiles stable,” he added.
