As you may recall, earlier this year, we experienced the sky high prices of many construction materials including steel rods and concrete. This basically put off construction to a standstill and many contractors put off projects in hopes of better times. What did ship breakers do during the era of inflated prices? They went around aggressively buying more ships than they could accommodate. Refused to break down existing inventory in hopes of even more exaggerated prices. If Bangladesh doesn't buy overpriced rods, surely China and US will.
Do you remember oil traders who bought oil at $100 waited for it to reach $140, then $200 but all of a sudden its now worth $64. Do you have any remorse for these people who have caused so much havoc in the last year? Are they asking for a government intervention? Where was this government intervention when prices of rods/oil reached unimaginable prices? What makes speculation worth saving?
Even though local ship breakers have let their imagination run wild, their situation is extremely realistic and critical. Now construction materials are more affordable. This doesn't suit the ship breakers on the speculative and opportunistic empire that they built while dismantling the rational and conservative nature it once had. According to Financial Express, the industry raked up loans near Tk 5500 crore (close to $1 billion) to establish their companies and buy the now-useless junk at the price of gold. But many other newspapers pin the figure at around Tk. 15,000 crore (close to $3 billion) in loans and close to 10,000 crore in danger of going bad. And most of this, was debt financed involving a few select handful of local banks.
Which banks are these? As a reassurance not all banks are involved in this. The ones involved are those that you don't hear about, recognize, see, or even realize that they were banks until they report amazing profits in the neighborhood of Tk 200 crore to Tk 300 crore. And people always wondered how do these banks make money? The answer will now be publicized better. They finance these importers and ship breakers. Because of this opportunistic and speculative sector, these particular banks are going to have one hell of a write-off next year. This is after having yet another year of mind blowing paranormal profits in 2008. But the banks are certain to make it through with flying colors (they haven't asked for any assistance), but the steel breaking industry is in for a rapid change in status quo.
Update: Some of the articles that are published on this site are purposely delayed to give some 'face time' to other articles and to evenly spread them out evenly. This is fine because this is more of an analysis site rather than a news site. But time to time the analysis may come too late or be mistimed. Even though this article pointed some issues out on October 30 (and published November 3/4). The Daily Star is now reporting the same insights on November 5th. Although it is not plagiarism, it is wishful thinking that we may have some big-box media readers.