China's ship-breaking industry is feeling
hemmed in by low steel prices, scrap oversupply and green production methods
In 2014, the ship recycling industry was
grey; it turned black in 2015; but, this year, it will go blood red.
That's not a dramatic line from a Hollywood
take on some imminent industrial tragedy. It's the writing on the wall that
workers of Zhoushan's ship-breaking yards in East China's Zhejiang province
cannot escape but notice.
The room for profit will continue to be
squeezed this year by declining steel prices and the high cost of
environment-friendly ship-breaking methods. Yet, pain will come despite favorable
policies of the past three years to encourage higher ship-breaking in response
to overcapacity and sluggish global trade.
The ship-breaking industry supplies raw
materials to infrastructure projects in a number of sectors such as hydropower,
housing, bridge and railway construction, particularly in developing countries.
The process starts when scrap-yard owners buy ships from owners.
To help China's shipping companies reduce the
pressure caused by overcapacity over the past four years, the central
government issued a subsidy policy to encourage the nation's shipping companies
to reduce the number of aging vessels and replace them with technically
advanced vessels in 2013.
Owing to complex global market conditions
that continued to pose challenges to domestic shipping, shipbuilding and
ship-breaking companies, this policy had been extended in June last year till
Dec 31, 2017.
China, therefore, will keep offering cash
subsidies of 1,500 yuan per gross metric ton to shipping companies that scrap
their vessels before their operational expiry dates.
Ship owners such as China COSCO Shipping Co
or Sinotrans & CSC Holdings Co are entitled to receive 50 percent of the
cash subsidies upon scrapping their vessels and the other 50 percent when a new
replacement vessel is built. The owners of all aging ships scrapped between
2013 and 2017 qualify for subsidies.
Zhang Yongfeng, deputy director of the market
research office of the Shanghai International Shipping Institute, said Chinese
ship-breaking yards have been adopting new technologies to carry out their
work, which involves higher costs for equipment, materials, storage and
workers' protective wear.
Compared with China, other major
ship-breaking countries such as Turkey, India and Bangladesh are still relying
on manual methods and outdated equipment to dismantle ships. Many scrap vessels
are even dismantled on beaches.
Zhang suggested the government should
consider offering more encouraging policies, such as tax cuts or financial help
to those buying steel-cutting equipment or materials, as many ship-recycling
companies bear heavy financial burdens in operating their businesses in an
environment-friendly manner.
"It was like riding a
roller-coaster," said Yang Jianchen, general manager of Zhoushan Hongying
Shipbreaking Co. "The period between 2006 and 2013 was good for the
industry. The decline in global steel prices including scrap has pushed many
ship-breakers in Zhejiang into the red."
Yang said since China's steel products are
being shipped to many developing countries such as India, Brazil, South Africa
and Turkey at lower prices now compared with previous years, it has pulled down
the price of their domestically made steel products. It has also affected scrap
prices at the yards.
Source: china
daily. 13 June 2016
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