China’s ship recyclers are mired in red ink, writes Katherine Si.
The ship recycling industry in China still faces dangers this year, Xie Dehua, president of the China National Ship Recylcing Association, warns.
The Chinese shipbreaking yards usually scrap the ships slower and more expensively than its competitors in the Asia region.
Currently, the scrapped ship price is very low in China, which means the ship recyclers’ days are very harsh at the moment.
Last year, China roughly scrapped 251 ships, totalling 1.93m gt, a decline of 22.4% year-on-year, including 1.08m gt of domestic ships, an increase of 111.8%, and 850,000 gt of foreign ships, a drop of 57.2%.
“As the global economy is not rosy, the internal demands of China is weak too, the scrapped steel price in China is really low at the moment, and the depression will continue this year,” Xie admits.
Xie urges that the nation’s ship recycling capacity stops growing.
Old yards are expanding and new ones are popping up leading Xie to warn: “The profit space will be squeezed tighter.” Yards’ utilisation rates are plummeting.
Nevertheless, looking long term Xie says the national goal is to pursue green ship recycling even if that means years of not being profitable.
Financial support from the banks is increasingly difficult for these yards, and since none of them are publicly listed alternative sources of funding are hard to come by.
Xie reckons Beijing’s ship scrapping subsidy, which has been in place for nearly three years, is not helping the yards. Owners get money, yards get work but with no good return, he claims.
“It is a fact that we get orders, but we can hardly make money from them,” a spokesperson from the leading ship recycling yard in China, Changjiang Shipbreaking Yard says. “The subsidies are sent to the owners, we can not get part of it.”
“The ship recycling industry in China has no market price,” bemoans Zhu Jiaobao, general manager of Zhoushan Changrong Metal Resources Recycling Company “The investment in the green operations and the taxes both lift up the costs of the shipbreaking yards. In addition, the downstream market is not pleasant, there’s too much scrapped steel for sale and the whole industry is suffering losses.”
The ship recycling association is currently suggesting to ease the high tax situation of the shipbreaking yards.
Profits may not be the only concern of the Chinese ship recycling yards, the whole industry is also facing a great pressure to ensure safe and green operations during the shipbreaking.
New regulations on safe production and environment protection across all recycling industries in the People’s Republic released earlier this year are forcing the yards to dismantle the vessels more carefully.
Xie has asked his association’s members to take the updated regulations as an opportunity to improve their safety standards and working processes.