ALANG, India (Reuters) - A global economic slowdown has hit industries ranging from automakers to investment banks, but in one small town on India's western coast, business is at record levels and workers can hardly keep up with demand.
In Alang, home to the world's largest ship breaking facility on the coast of Gujarat state, the financial year to April will be one of its best ever, as a slowdown in global trade and lower freight rates mean ships are being scrapped faster.
But there is a flip side. Activists fret that the booming business will encourage a disregard for safety and environment guidelines, which they say ship breakers are already flouting.
Stretched along the 11-km (7 mile) coastline, beached oil tankers and cargo carriers lie in various stages of disembowelment. Peculiar tide patterns that brings high tide in only twice a month enable the beaching of ships right up to the yards.
Men in blue overalls and hard hats, operating cranes, wielding blowtorches, hacksaws and hammers swarm over the beached ships, many condemned to a premature end because of the slowdown.
"Idle ships are a huge financial burden, so ship owners don't have any option but to get rid of their ships, even if it means scrapping them years ahead of schedule," said Vishnu Kumar Gupta, joint secretary at the Alang Ship Breakers Association.
Alang has received more than 125 ships in the last three months alone, compared to 136 ships in all of 2007 and 2008, Gupta said. Ship breakers expect this year's total to hit 250, making it among the best years ever.
"In the past five to six years of the boom, very few ships were scrapped and we were working on zero margins as there was intense competition for the few ships that were coming in," Gupta said.
Ships were once either sunk or taken apart in the countries where they were built, before high costs and environmental restrictions drove ship breaking efforts elsewhere.
India, China, Pakistan and Bangladesh carry out 80 percent of the world's ship breaking business. Labor activists say this is largely because of cheap labor costs and lax safety standards that fail to protect workers who are exposed to toxic chemicals as they dismantle the scrapped vessels.
About 150-200 workers can break down a 10,000-tonne ship in three months, salvaging nearly every part.
The road to Alang is lined with sheds selling doors, tables, sofas, kitchen ranges, crockery, bathtubs, air conditioners and sheets of steel, the most precious commodity.
But the economic slowdown has cut into profits, hitting breaking charges and scrap values.
About 80 percent of a ship's steel is "reusable steel," Gupta said, cheaper than primary steel and used mostly in construction.
With a property slump from the global recession, demand for steel has fallen and prices have dropped by 80 percent since mid-2008 when steel along with other commodities were enjoying record highs.
Nevertheless, profits from the booming demand for ship breaking services have turned the businessmen, who lease the yards, into millionaires.
At the same time, the workers who earn only a few dollars a day, face health hazards as they cut up the hulls of ships, navigating through razor sharp pieces of steel, and being exposed to carcinogens and even radioactive materials from the former cargoes of these ships.
"These are the most vulnerable of workers, working in extremely dangerous conditions with little protection or recourse to proper care," said Gopal Krishna of Toxics Watch in New Delhi.
"The ship breakers claim conditions have improved, but there is no documentation, and no means of verification," he said.
DIRTY AND DANGEROUS
Alang was at the center of a global controversy when aging French aircraft carrier 'Clemenceau' set sail for its yards in December 2005 because of the presence of many toxins including mercury, lead and asbestos.
Greenpeace protested and India's Supreme Court halted the ship's access to Alang in January, forcing Clemenceau to return to France. It will now be broken at a special yard in the UK.
While several international protocols check the movement of toxic materials and ensure worker safety, activists say recyclers have not signed up, or do not follow the guidelines.
"By any standards, the demolition of ships is a dirty and dangerous occupation," the International Labor Organization said in a report, which estimates India's ship breaking and recycling industries directly and indirectly employ half a million people.
"The feasibility of ship breaking is largely determined by the price of scrap metal. The race is to find countries where occupational health and safety standards are not enforced."
Increased competition is driving workers' wages lower and the prices of recycled materials are also expected to fall, the ILO report noted, but there is also greater pressure on ship breakers to implement stricter safety and environmental measures.
Gupta, of the Alang Ship Breakers Association, says safety guidelines are adhered to, and that workers earn about 300 rupees ($5.80) a day, well above the minimum wage.
There are modern hazardous waste management facilities, he said, and a new code will soon be adopted that is being formulated by the ILO and the United Nation's International Maritime Organization.
Krishna, of non-governmental organization Toxics Watch, was less sanguine about prospects for Alang.
"Yes, they may break more ships, but I have no hope that conditions for workers or the environment will improve."
(Editing by Alistair Scrutton and Megan Goldin)