China COSCO Holdings Company Limited received a subsidy amounting to approximately RMB3.963 billion or USD 644 million through China Ocean Shipping, the controlling shareholder of the Company, for the decommissioning and upgrading of vessels.
According to China Accounting Standards for Enterprises, the Subsidy was recognized as non-operating income and will be included in the profit and loss of the Company for the year ending, which will be in a certain degree a positive impact on the company's financial result for 2015.
The Subsidy is intended to compensate the losses suffered by the Company due to the advanced disassembling of the vessels.
In April this year, the Chinese shipping and logistics services supplier, pushed ahead with its fleet scrapping plan by dismantling two container ships and two bulk carriers.
All together, eight container ships and 18 bulk carriers were scrapped in the first four months of 2015 by the Company.
Cosco announced In January, that it planned a new round of scrapping of old tonnage of 23 vessels with 1.1 million dwt for 2015.
Earlier this month, China extended by two years subsidies for domestic shipowners that scrap old tonnage and order new vessels to match the retired tonnage, which were planned to expire by the end of the year.
Two years ago, the Chinese government unveiled a polished version of subsidy policy to encourage the local shipping companies to scrap aged vessels, which is aimed at reduction of glut in capacity and emission cut.
The subsidies back then were boosted 50% to CNY1,500 per gross tonne, compared with the previous policies, issued in 2010.
As stated by the China's Ministry of Transport, the eligible vessels should be China-flagged and about to be dismantled at 37 approved Chinese scrapyards.
If the shipowners order new tonnage at Chinese shipyards to match the retired tonnage, the subsidies will be doubled.