April 3, 2012

 

China Ocean Shipping firm suffers biggest loss since 2004

 

 

China Ocean Shipping (Group) Company lost RMB10.5 billion (US$1.64 billion) in 2011, its biggest loss since it was listed seven years ago, compared with a profit of RMB6.8 billion (US$1.35 billion) in 2010.

 

This is also one of the largest financial losses amid widespread industry deficits in 2011, thanks to the surging oil price and a glut of vessel supply in shipping markets that seriously depressed freight rates.

 

China Shipping (Group) Co, the largest State-owned shipping conglomerate in China, another major Chinese shipping company, saw a loss of RMB2.7 billion (US$0.43 billion) in 2011 while it had gained a profit of RMB4.2 billion (US$0.83 billion) in the previous year.

 

Maersk Line, the world's largest container carrier by capacity, reported an annual loss of US$600 million in 2011. It had enjoyed a profit of US$2.6 billion in the previous year.

 

"The year 2011 was disappointing for the global shipping industry and we regret to see such a result," COSCO Chairman Wei Jiafu said at a news conference in Beijing on Friday (Mar 30).

 

Containers and dry bulk carriers were the major drags on COSCO's financial performance. In 2011, the company's revenue from its container business declined 11.8% from the previous year, while oil costs in the sector surged 36.6%. Revenue from the dry bulk carrier sector fell 28.7% on-year while oil costs surged 31.7%, the company said.

 

The Baltic Dry Index, a measure of shipping rates for bulk goods such as coal, iron ore and grain, declined 43.6% from an average of 2758 in 2010 to 1549 in 2011, one of the lowest readings in recent years.

 

"The difficult market conditions for the dry bulk carrier sector are likely to persist until 2014," said Li Chengshan, an analyst with Clarksons, a leading global shipping services provider.

 

COSCO expects the shipping market to remain troubled throughout this year, as the global trade volume slackens, the oil price remains high and more tonnage is due to be launched into the market.

 

Wei said the company is confident it will slash its financial losses in 2012, "but the exact amount remains unclear".

 

As most shipping companies were struggling on the verge of bankruptcy, "we expect to see an industry reshuffle this year", Wei added.

 

COSCO General Manager Jiang Lijun said the company will take advantage of the coming industry rationalisation to acquire some shipping companies "if there is an opportunity".