Analyses: Market and Credit is the key to improve competitiveness of Scrapping Industry

2014-09-24

About the market competitiveness of scrapping enterprises is always a long-standing debate and this issue has always been posed in the shipping conferences. Most officials and analysts believe that the solution is support from the government policy. However, others said the policy support is just guidance and the most important is good reputation and market.

President of Changcheng Ship Company had preference on the second views. There are three phases for development of scrapping industry.

First, the old vessels purchased by the government were dispatched to the scrapping yard. Then the capital of the scrapped ships was withdrawn by the government like a cycle.

Second, the government issued policies instead of funds to support the scrapping industry. The enterprises purchased the old ships at their own risk. The government would offer subsidies and tax cuts to the scrapping enterprises.

Third, but for now, the government would neither fund nor issue preferential policy. The enterprises are fully in the competitive market.

Through analyzing the three phases above, Wang said that although the government has offered subsidies and policies, it cannot compete with South Asia scrapping emperies. Sometimes the totally market competition also can have ability beyond South Asia scrapping yard. The reason is that market competition depending on harmonious development of upstream and downstream markets.

For China, the demand of the downstream market is lowering and a mass of scrap steel cannot be sold out causing purchasing ability of the enterprises declining. In addition, the government encouraged the shipping enterprises to scrap the fleet in advance, causing a lot of ship flying the five-star red flag entering into scrapping market.

Therefore, the key for improve the competitiveness of scrapping enterprises is market and good reputation and the government policies were just orientation.

In conclusion, scrapping industry, like other industries, shall enter into market competition and the enterprises can maintain health development with a good reputation.

Source from : CNSS

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