Beijing's ship scrapping subsidy is to be extended as China fights rampant overcapacity in its national merchant fleet.

The Ministry of Transport said in a statement that the program – which gives shipping lines subsidies of 1,500 yuan (US$241.67) per gross ton to replace old models with newer, greener ones – would be extended to the end of 2017. The initiative was first launched towards the end of 2013. State-run lines in particular have rushed to follow the program, their willingness to scrap latterly seeing them get greater state-backed financing for a new raft of newbuilds.

Despite the subsidy program, Chinese ship recyclers continue to report very tricky operating conditions with most still in the red, and none of them able to compete price-wise with their Indian sub-continent rivals.