The Chinese Government announced on December 9th 2013 the details of ship recycling subsidies that are to be granted to Chinese flagged vessels that are recycled at domestic yards in North and South China.
Key highlights of the subsidies are as below
1. A premium of 750 RMB / GRT (about USD 124 / GRT) is provided to ship owners and is applied to any Chinese flagged vessel(s) that are recycled locally.
2. A subsidy of 750 RMB / GRT (= USD 124 / GRT) is to be applied on any newbuilding(s) (from domestic owners to be Chinese flagged) that is/are built in China. This subsidy is only applicable if the ship owner has scrapped a similar sized vessel over the same time period, at a domestic recycling yard.
3. The subsidy scheme will included vessels delivered to Chinese yards during fiscal year 2013 and will last through fiscal year 2015.
However, the subsidies do have their share of limitations, some of which are as follows:
1. At the time of writing, only a handful of yards (about 5) in North and South China have made the cut. However, several more (from North China) are expected to obtain the necessary approvals in the near future.
2. The procedure for Chinese owners / Chinese flagged vessels seeking to make full use of the subsidies, is expensive and complicated. Domestic companies are first required to obtain the necessary approvals / licenses from the Chinese Communications Ministry. Thereafter, they are required to set up an operating company in mainland China and are required to pay a tax rate of 25% on the transaction.
3. Being implemented for the domestic Chinese market, foreign flagged vessels and owners are exempt from this policy.
4. Lastly, there is an age limitation for vessels to be Chinese flagged ie 18 years old for containers and 20 years old for bulk carriers.
The immediate beneficiary of the above subsidies seems likely to be the (major) state run Chinese companies, who have committed about 40 vessels to Chinese yards during 2013. Additionally, at least one VLCC from Chinese owners has also been reported sold to a local yard.
Source: steel guru. 12 December 2013http://www.steelguru.com/international_news/China_announce_ship_recycling_subsidies_of_CNY_750_per_GRT_GMS/329463.html