An end to tax rebates on Chinese steel exports and a weak global steel market will see the price gap widen between China's shipbreaking yards and their counterparts on the Indian sub-continent during 2015, according to analysts.

"Rumours abounded this week that the export of steel (as well as domestic production) may be limited over the course of this year in China,” GMS, a leading cash buyer of ships for recycling, said in its weekly report. "If this turns out to be the case, this would be promising news for the Indian sub-continent markets and may yet see prices improve once again there."

On Jan. 1, China ended an export-tax rebate on steel alloys that contain boron, which is expected to pressure Chinese steel exporters into raising export prices to avoid losses. Analysts for Custeel have said steel wire export prices would have to increase by an estimated 25% in order to stay profitable. Chinese steel prices are already under pressure from weak domestic demand, low iron ore prices and an oversupplied marketplace.

China's overseas steel sales are projected to fall by 20 percent to 30 percent in the first quarter of 2015 from the previous quarter, according to Custeel steel market analysis. China International Capital analyst Ma Kai forecasts a 25 percent decline in exports, Bloomberg reports. China was the world’s biggest steel exporter in 2013.

Chinese yards are currently paying between US$200-220/tonne LDT for general cargo tonnage and US$250/tonne LDT for tankers, according to GMS data. The company says it expects prices to remain at this level "for the majority of the year" while government subsidies are still in effect.

The price differential has widened further between yards in China and Turkey, their closest rival in terms of price. Turkey is now paying around US$85/tonne LDT more than China for general cargo vessels and approximately US$60/tonne LDT for tankers, GMS says. On Dec. 2, 2014, the figure was around US$40/tonne LDT more for both types of vessel.

In contrast, yards in India, Pakistan and Bangladesh are paying up to US$180/tonne LDT more than China for general cargo ships and up to US$175/tonne LDT for tankers, GMS says. This is a slight contraction on December levels, due to a softening market.