25 September 2018

Easier wrecking rules a lifeline for sinking shipping plays

As it beats the moribund shipping industry with the anti-graft stick, the central government is also holding out the subsidy carrot to help troubled players retire aging fleets.

The ministries of transport, finance, and industry and information technology as well as the National Development and Reform Commission have reached a consensus on relaxing subsidies for scrapping aging vessels, the China Securities Journal quoted an unnamed industry insider as saying.

Although no details are available, the proposed change is designed to lower the barriers for the ship demolition subvention launched in 2010. On top of the 1,000 yuan (US$164) for each metric ton scrapped, the central government is expected to offer money to offset losses shipowners could incur from phasing out the old ships, the newspaper reported.

If the change does come in, 4.56 billion yuan in fresh subsidies will be handed out, a timely lifeline for struggling dry bulk shipping companies in particular, the report said. It’s just what many have been waiting for. Major domestic shipowners have put the recycling of old vessels on hold since 2012 in the hope of just this kind of aid.

The newspaper cited global shipping information provider Clarksons as saying that the owners of China’s three biggest fleets — China COSCO (01919.HK, 601919.CN), China Shipping Development (01138.HK, 600026.CN) and Sinotrans Shipping (00368.HK) — have a combined 8 million deadweight tons of decades-old ships awaiting disposal.

Investment banking firm China International Capital Corp. estimates that China Shipping Development alone can pull in up to 700 million yuan in new subsidies next year. It would be a welcome infusion for a company that lost 1.2 billion yuan in the first three quarters of this year.

– Contact the writer at [email protected]


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