According to Suzhou Cosc Marine Machinery Co., Ltd., the shipbuilding industry has fallen on hard times recently, yet no one can predict how long this “cold winter” will last. This raises a question: Is ship‑breaking more profitable than shipbuilding? Is ship‑breaking genuinely more lucrative than shipbuilding?
Suzhou Cosc Marine Machinery Co., Ltd. reveals: “These are difficult times. Shipyards take orders merely to stay afloat; breaking even is already a good outcome.” Surprisingly, one major ship‑enterprise earns more revenue from ship‑breaking than from shipbuilding. How can ship‑breaking generate higher returns than both shipbuilding and ship‑repairing?
Suzhou Cosc Marine Machinery Co., Ltd. explains the underlying logic. Generally speaking, shipbuilding and ship‑breaking stand in opposition to one another. When the shipbuilding market booms, the ship‑breaking business tends to slump; when shipbuilding conditions deteriorate, ship‑breaking prospers. At present, however, steel prices remain low, so recycled steel obtained from vessel scrapping commands poor prices. As a result, both shipbuilding and ship‑breaking markets are in the doldrums.
Ship‑breaking is a polluting industry. Environmentally‑friendly ship‑breaking requires sophisticated technical capabilities. European and American shipowners impose stringent environmental requirements when scrapping old vessels. Shipbuilding belongs to the manufacturing sector, while ship‑breaking falls under services. Amid the market downturn, shipyards have to explore more viable ways to operate.
Total ship‑breaking volume for 2016 is set to hit a new high. Latest statistics from Suzhou Cosc Marine Machinery Co., Ltd. show that the international ship‑breaking market has rebounded to relatively high levels this year after slowing down in the second half of 2015. To date, 457 vessels totalling 25.8 million deadweight tons (DWT) have been scrapped. Dry‑bulk carriers account for the largest share of scrapped tonnage, followed by container ships. The ship‑breaking market is expected to maintain its prosperity in the future, with dry‑bulk carriers and container ships remaining the main candidates for demolition, and 2016’s scrapping volume is likely to reach a record level.
In recent years, the global shipbuilding industry has been mired in a prolonged downturn. During the 13th Five‑Year Plan period, average annual global demand for new‑build vessels stands at approximately 80‑90 million deadweight tons. Although China’s shipbuilding capacity has dropped from 80 million DWT to around 65 million DWT, it is still capable of satisfying most of the world’s demand. Currently, over 40 percent of China’s shipbuilding capacity lies idle, and supply‑side reform remains a long‑term arduous task.