Dalian Shipbuilding Industry has teamed up with Angang Steel and one of Asia's largest shipping companies to launch a 3 billion yuan (HK$3.69 billion) ship repair and recycling complex that will be the biggest such facility north of Shanghai.
Steel from ships scrapped at the facility will be sent to Angang Steel's blast furnaces in Liaoning province to make new material that could be sold to Dalian Shipbuilding to build ships.
The shipping partner in the venture is Singapore's Pacific International Lines, in which Chang Yun Chung and family have an 89.61 per cent stake. PIL is the major shareholder, with a 39.45 per cent interest, in Hong Kong's Singamas Container, the world's second-largest marine container maker.
Teo Choo Wee, who is overseeing the project for PIL, said: 'It will be the largest and most modern facility of its kind in northern China. It will be one of the most environmentally friendly recycling yards in the world.'
Teo said the facility would fully comply with the International Maritime Organisation's convention for the safe and environmentally sound recycling of ships, which was adopted by the organisation's diplomatic conference in Hong Kong in May 2009.
Torben Skaanild, the secretary general of the Baltic and International Maritime Council, said that while the Hong Kong convention had yet to enter into force, it 'was interesting the two main regulatory centres - Washington and Brussels - were moving forward on the IMO standard'.
The European Commission proposed new rules in March that ships registered in European countries could only be recycled in facilities that are safe for workers and environmentally friendly.
The proposals, which will be discussed by the European Council and the European Parliament, aim to implement the Hong Kong convention quickly, without waiting for its ratification and entry into force, a process which will take several years.
Teo said the complex on Dalian's Changxing Island would be capable of repairing up to 90 ships a year ranging in size between 70,000 and 300,000 deadweight tonnes when it became operational by the end of next month.
This will include massive supertankers and the world's largest container ships, including Maersk's Triple-E series of 18,000 teu (20-foot equivalent units) boxships that will be delivered from 2014.
Teo said the ship recycling complex, which will begin operating in the fourth quarter of this year, was targeted to scrap 75 vessels a year and produce 75,000 tonnes of steel for recycling.
Scrap steel prices have surged in the past year, hitting more than US$500 per tonne in August, although they have cooled to more than US$400 per tonne as Chinese recyclers competed for ships against operators in India, Bangladesh and Pakistan.
Ships totalling US$38.3 million were sold for scrapping last year, a 53 per cent increase over 2010.
Asked why the three partners came together, Teo said PIL has been a major customer and strategic partner of Dalian Shipbuilding, ordering a total of 45 ships at the shipyard, of which 37 had been delivered.
Angang Steel is the major supplier of steel plates to Dalian Shipbuilding for both new ships and ship repair.
The combined facility will cover 1 million square metres and have a total quay length of 3.8 kilometres.
Teo said Dalian's close proximity to Japan and South Korea meant it was cost-effective for shipowners in both countries to send their ships to Changxing for recycling.