China’s
ship-recycling industry is under mounting pressure from ongoing low steel
prices and the increasing costs of adopting “greener” vessel-breaking methods,
according to senior industry officials.
The latest figures
show ship-recycling revenue dropped 15 percent to 3.4 billion yuan ($519
million) in China last year.
But labor and
environmental protection costs soared, and the price of scrap plummeted－a double-whammy which Wu
Jun, vice-president of the China National Ship-recycling Association, said is
putting many firms under threat.
Recycled ship parts
provide raw materials for infrastructure and capital projects in a number of
sectors such as hydropower, bridge and railway construction at home and in
other developing economies.
The process starts
when scrap-yard owners buy ships from owners.
“China has been
cutting its surplus steel capacity, upgrading its industrial structure, and
slowing its investment in infrastructure and real estate, and as a result, the
need for large amounts of scrap steel is falling fast,” said Wu.
Last year was the
fourth consecutive year that the industry has suffered financial losses.
The association’s
findings showed ship-recycling companies in China signed contracts with both
domestic and foreign shipowners to dismantle 1.63 million displacement tons (or
6.84 million dead weight tons) of scrap vessels in 2015, a 28.7 percent fall on
the previous year.
The price of scrap
steel was expected to fetch between 1,043 yuan and 1,327 yuan per ton in China
in 2015.
The price, however,
has dropped to between 900 yuan and 1,000 yuan, as supply and demand fell in
many sectors such as automobiles, railway equipment and other manufacturing
industries, which provide and use large quantities of scrap.
“The result is, it
will be very difficult this year for Chinese ship-breaking yards to sell scrap,
even at bargain-basement prices,” Wu said.
“The high prices
for both foreign and domestic scrap ships are also cutting the profit margins
of Chinese companies, and many have been reporting financial losses for the
past three years.”
China’s
ship-recycling yards are mainly located in Zhejiang, Jiangsu, Shandong and
Guangdong provinces, collectively employing around 120,000 workers, and jobs
are now also under threat.
The dropping scrap
prices have seen firms storing supplies in increasing amounts, rather than
offloading it cheaply to steel plants, said Wu.
Affected by low
commodity and crude oil prices, the association said the number of bulk vessel
and offshore oil rigs actually being dismantled has grown more than 30 percent
in the past year, adding to the oversupply in underpriced scrap.
Commenting on the
situation, Zhang Yongfeng, deputy director of the market research office of the
Shanghai International Shipping Institute, suggested the government should
consider offering more encouraging policies, such as tax cuts or financial help
to those buying steel-cutting equipment or materials
Source:
Hellenic
shipping news. 5 March 2016
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