India is expected to see a spurt in ship breaking activity in the next two years as the shipping industry grapples with excessive capacity in a weak business environment, Crisil said.

India's ship breakers will acquire a larger market share globally, supported by favorable demand for steel scrap, and limited competition from other markets, including China and Bangladesh, the ratings agency said.

Expansion in global shipping capacities and declining freight rates will continue to propel interest in ship breaking, it said.

India's shipping sector, like its Asian peers, have been weathering a storm as it negotiates the double whammy of a global downturn and oversupply of dry bulk carriers and tankers.

Low charter rates have hit profitability in an industry which was still recovering from the global economic slowdown of 2008/09.

Crisil said the global market share of India's ship breakers is expected to grow to 40-45 percent in the next two years from 35 per cent in 2010.

Ship breakers will also benefit from India's growing demand for steel scrap extracted from ship breaking, the report said.

"Shortage in supply of iron ore, following a ban on iron ore mining in Karnataka, and possibly other states, will keep demand for scrap buoyant in India in the next two years."

The ship breaking industry meets 30 percent of India's requirement for steel scrap.

In the last three years, the revenue of 52 ship breakers, constituting 46 percent of the Indian industry, increased at a compounded annual growth rate of 46 percent, helping these players nearly double their net worth, the report added. (Reuters)