Increase in Tax Structure Pulled Down Bangladesh Scrapped Vessel Imports in 2019 – PHP

Increase in Tax Structure Pulled Down Bangladesh Scrapped Vessel Imports in 2019 – PHP

Mr Zahirul Islam is a Director at PHP Family and MD of PHP Ship Breaking and Recycling Ind. Ltd. and PHP Ispat Ltd, overseeing the operations of the Long Steel and Recycled steel divisions of the PHP family. He shared his views about the outlook on ship recycling market in Bangladesh, Hong Kong convention for ship recyclers and PHP’s green ship recycling yard. Below is an edited excerpt from his recent interview to SteelMint.

Q1. Import of scrapped vessels to Bangladesh for ship recycling witnessed a sharp fall in H2 2019, after record high imports in H1 2019. What were the major policy reasons in 2019 budget, responsible such a fall?

Ans 1. In 2019 budget, the government has increased Advance Income Tax (AIT) from BDT 300  to BDT 1000 per tonne, and has also imposed 5% Advance Tax. This has increased cost of buying vessel and at the same time we witnessed the local demand for steel drop. These are the main reasons why we saw a sharp fall in scraped vessel import in second half of 2019.

Q2. How do you see the Bangladesh’s ship-recycling market to perform in 2020?

Ans 2. Shipping industry is going through a tough time. The China-USA tension and Corona virus risks are some of the reasons why such a situation is being observed. Many ships are being sent for scrapping as ship owner are not getting order.

This is an ideal situation for the ship recycling industry. Prices of scrap vessels are also coming down now. I think we will see a lot of activities in the recycling industry in 2020.

Q3. Can you put some light on the Green recycling yard of PHP family and how is it different than normal ship-breaking yards in Bangladesh ?

Ans 3. PHP Family has invested 6 million USD to transform its traditional yard into a green one. Class NK (the Japanese Classification Society) has recently given statement of compliance to Hong Kong Convention to PHP.

This is a huge achievement for PHP as Class NK SO is regarded as the best certificate in the world. We ensure environmental and workers safety throughout the recycling process. Our workers get regular training on various safety topics and we bring trainer from abroad to carry out specialized training.

Q4. What criteria does a ship recycler needs to fulfil to be certified as a Green ship recycler and is there any timeline for the same issued by authorities?

Ans 4.  A facility needs to meet the requirements of Hong Kong Convention to be certified as green ship-recycler, ensuring that end-of-life ships do not pose any unnecessary risks to human safety and to the environment when recycled.

The rules cover the design, construction, operation and preparation of ships for dismantling; the operation of ship recycling facilities in a safe and environmentally friendly manner; and the establishment of an appropriate enforcement mechanism for ship-recycling.

Realistically, a facility may need 2 to 4 years to become green recycler.

Q5. Does volatile imported scrap price trend impact ship-yard melting scrap prices?

Ans 5. No, usually, imported scrap market trend does not have an impact on ship-yard melting scrap prices, which generally depend on local demand and supply tightness/availability.

Q6. Are ship-plates from cutting of scrapped vessels a good alternative to billets for stand-alone rolling mills in Bangladesh? 

Ans 6. Ship plate cannot be an alternative to billets as their grades are different from each other. Although many manual or hand rolling mills use ship plates for rolling, the grades are not of the same quality.

Founded in 1969, PHP Family is one of the major conglomerates in Bangladesh comprising of over 30 companies in sectors ranging from Steel, ship recycling power and textiles.  PHP Ship Breaking and Recycling Industries Ltd was incorporated into PHP Family in March 2000 and spread over a total area of 20.2 acres, the PHP’s recycling yard has processed over 140 ships and 1.7 MLDT of ship-breaking volume in total as of 2019, remaining the only ship recycling facility at Bangladesh which complying the requirements of Hong Kong International Convention as of yet.

To know more about vessel imports and price trends of the ship recycling industry in Bangladesh, book your seat at SteelMint’s 3rd Steel and Raw Material Conference, Bangladesh and get a chance to hear views of renowned industry participants from across the globe. The conference is being organized on 23rd-24th March 2020 in Chittagong, Bangladesh.

1 Comment
  1. PHP Cousre

    Nice post. it is useful thank you for sharing information.
    keep sharing post.

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