Given the dearth in newbuilding orders, Chinese shipbuilder Jiangsu Yangzijiang Shipbuilding has set its sights on the booming ship demolition business.
Given the dearth in newbuilding orders, Chinese shipbuilder Jiangsu Yangzijiang Shipbuilding has set its sights on the booming ship demolition business.
Yangzijiang Shipbuilding teamed up with Chongqing Iron and Steel to form a ship demolition company, Jiangsu New Yangzijiang Metal Recycle, with a registered capital of Yuan600m ($88.2m).
The project is scheduled to be operational by the end of 2010 and total revenues are expected to reach up to Yuan10bn.
Chairman of the group"s listed arm, Yangzijiang Shipbuilding Holdings, Ren Yuanlin told local media that the company"s shipbuilding business is at a saturation point so it has decided to diversify into ship demolition.
Mr Ren set a target for the company to become one of the top three ship demolition companies in China, although he did not give any indication regarding the volume of vessels it hopes to scrap.
A spokeswoman for the shipbuilder confirmed the reports, but declined to give any further details.
China"s ship scrapping industy has experienced a sharp upturn in business this year. According to the China National Shiprecycling Association, Chinese yards demolished a total of 1.5m dwt of vessels in the first six months of this year, equal to their accumulated demolition volume over the past four years.
Given the sharp downturn in the global shipping industry, many owners are now looking to scrap elderly vessels which they kept operating during the boom times.
Jiangsu province is one of the main ship demolition hubs in China. In the first six months of the year, 100 vessels totalling 758,000 dwt were placed at Jiangsu shipyards for demolition, up 4.6 times as compared with the level in the same period last year.
A newspaper under China"s Ministry of Transport quoted sources as saying although Jiangsu Yangzijiang Shipbuiling already owned facilities and land for ship demolition, the government authority has not issued the license to the shipbuilder for it to scrap ships.
Yangzijiang Shipbuilding recorded a 30% year-on-year increase in net profit in the first quarter of 2009 to Yuan483m and operates two shipyards in Jiangsu province.
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