Plunging scrap steel prices hit ship recycling revenues

By Anil Mathews (ScrapMonster Author)

March 04, 2016 01:52:09 AM

BEIJING (Scrap Monster): The Chinese ship recyclers are feeling the heat as falling scrap steel prices have eaten into their revenues during the past one year. The latest official statistics released by the China Association of the National Shipbuilding Industry suggests 15% drop in ship recycling revenues in the country during last year.

The country’s ship recycling revenue had witnessed four consecutive years of rise from 2011 to 2014. The revenue which stood at 3.02 billion yuan in 2010 had increased to 3.19 million yuan in 2011 and to 3.37 million yuan in 2012. The revenues had surged higher in 2012 to 3.62 million yuan. The revenues had touched five-year high in 2014 at 3.92 million yuan. However, the revenues dropped significantly by almost 15% to 3.4 billion yuan in 2015.

According to senior industry officials, the Chinese ship recycling sector was badly impacted by the continued weakness in steel scrap prices. The huge drop in demand from major sectors including automobiles and manufacturing industry resulted in sharp drop in steel scrap prices to anywhere between 900 yuan and 1,000 yuan in 2015. This has squeezed the profit margins of many companies. In fact, many ship recycling companies in China has been reporting financial losses during the past three years. Moreover, the cost of operation has surged higher on account of measures taken by them to implement “greener” vessel-breaking methods, as directed by the Chinese authorities.

The Association data indicates that the total value of contracts signed by Chinese ship recyclers with domestic and foreign ship owners have dropped significantly by almost one-third in 2015, when compared with the previous year.

Meantime, industry participants urged the government to make necessary relaxations on policies to aid the struggling industry. They also called for other measures such as tax cuts and financial assistance to support the industry which employs roughly 120,000 workers, whose jobs are at risk now.