Despite growing demolition in China, Chinese scrapping facilities see their profits declining with plunged prices of iron scrap.
Mr. Wu Jun, vice president of the China National Ship Recycling Association (CNSA), forecasted that ship demolition business in the fourth quarter of this year will be as similar as Q3 and pointed out that Chinese ship breakers will see losses.
According to tentative statistical data, about 250 vessels have been sold to Chinese scrapping facilities and steel-scrap prices are now standing at around CNY 2,000-CNY 2,300 ($320.7-$368.8) per ton, declined from CNY 3,000 per ton in 2011.
Mr. Wu Jun said that scrap vessel purchase prices are around $320/ldt in China. As scrap prices stay above iron-scrap prices, demolition companies lose more money, when scrapping volumes grow.
Moreover, with total iron-scrap stock reaching almost 0.5m ton, they are also having difficulties in cash flow.
He said if current situation does not get better, there will be many companies going bankrupt soon.