China’s shipbreaking industry is going through a
loss-making year and the outlook remains grim due mainly to declining steel
prices and high inventory, according to the ministry of industry and
information technology (MIIT).
The ministry revealed that domestic scrap prices
slid to an average of RMB1,946.3 ($317) per ldt in June, down by 5.6% compared
to the price in January this year and a decrease of 12.1% year-on-year.
The government also reported that domestic
shipbreaking enterprises generated a combined first half revenue of
approximately RMB2.2bn and operating loss of more than RMB200m.
Excessive domestic steel production and the fall in
import prices of iron ore, coupled with rising labour and operating costs, have
all conspired to put internal and external pressures on the shipbreaking
industry, the ministry added.
Zhu Jiaobao, general manager of Zhoushan Changhong
International Industry Pack, was reported saying: “On one hand, the cost of
environmental protection and taxes are raising the cost of business; on the
other hand, demand for scrap steel has plummeted and inventory is piling up,
pushing the entire industry into a loss-making situation.”
China National Shiprecycling Association (CNSA)
warned that China’s ship recyclers could undergo “a round of consolidation” as
the bigger scrapyards are struggling with low margins while the smaller ones
are finding it hard just to maintain their daily operations. Moreover, the
smaller yards that typically lack cashflow are not expected to make it through
the difficult times.
The association highlighted that during this
challenging period, it is urging shipbreaking yards to focus on internal
reorganisation, improving workplace safety and raising environmental standards
in order to enhance their competitiveness.
Source: seatrade
global. 25 November 2014
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