Beijing: Prices at China’s ship recycling yards are languishing at around $200/ton LDT lower than rival yards in southeast Asia – the widest price differential ever seen.
“The gap has never been as wide as it is now,” a China-based broker for GMS, a leading cash buyer of ships for recycling, told SinoShip.
China’s scrap prices have reached the lowest levels seen for over six years, he said.
Chinese yards are currently paying between $200-220/ton LDT for general cargo tonnage and $240-250 for tankers, the broker said. A bulker of 7,000 LDT would go for around $220/ton.
In contrast, yards in India, Pakistan and Bangladesh are paying between $415-425/ton LDT for general cargo ships and between $445-450/ton LDT for tankers.
Traditionally, Turkey has been priced lower than China, but now Turkish prices have overtaken their Asian counterpart, paying around $40/ton LDT more for both general cargo vessels and tankers alike.
Prices in China are lower even than yards in the Philippines, Vietnam, Indonesia that are scrapping locally flagged vessels of a smaller lightweight, the broker said.
China is currently offering subsidies of about $250 per gross tonne for Chinese shipping companies that scrap vessels early and then place orders at Chinese shipyards for at least the same tonnage.
“The only vessels going into Chinese yards are from state-owned companies who are eligible for the subsidy – COSCO and the like. For anyone else, it’s worth their while going over to the subcontinent,” the source told SinoShip.
The problems in south-east Asia's scrapping market stem from the export of cheap Chinese billets. “Until measures are taken to tax these imports, the international ship-recycling sector may remain in the doldrums for some time yet,” GMS said in its weekly market report on Monday.
China's scrapping activity has slumped over the past quarter. The country scrapped 35 vessels (291,000 tonnes of recycled metal) in the third quarter this year. This was a 31% decrease in the number of vessels scrapped compared to the previous quarter, when China scrapped 51 vessels (412,000 tonnes in recycled metal).
Almost all ships broken in China were sold by Chinese owners during the third quarter this year, according to research compiled by environmental group Robin Des Bois.
The only exceptions were the North Korean cargo ship Tae Dong Gang; the car carrier Madame Butterfly owned by Sweden-based Wallenius Line; and the ex-Russian passenger liner George Ots, which was sold secretly by an unscrupulous Chinese charterer, the research says.
Last month, the president of the China National Ship Recycling Association warned that many ship recyclers in China are likely to go bankrupt in the next 12 months. [2/12/14]