China Cosco, CSCL Tumble After Wider Losses: Hong Kong Mover - Bloomberg

By Bloomberg News - 2012-08-29T16:28:17Z

China Cosco Holdings Co. (1919), the country’s largest listed shipping company, posted a wider first- half loss as a global capacity glut sapped rates for carrying commodities and containers.

The loss was 4.87 billion yuan ($767 million) compared with a loss of 2.76 billion yuan a year earlier, the Tianjin, China- based company said in a Hong Kong stock exchange filing late yesterday. China Shipping Container Lines Co. (2866)’s loss doubled in the period, according to a separate statement.

China Cosco’s dry-bulk shipping unit widened its loss to 3.42 billion yuan as expansion in the global fleet outpaced China’s demand for raw materials causing rates to tumble. The company’s container-shipping fleet, China’s biggest, also posted a deeper loss as it was unable to raise rates enough to offset an 11 percent increase in fuel costs.

“Dry-bulk will continue to be weak,” Barclays Plc analyst Jon Windham said before the results were released. “We do expect them to make a loss for the whole year.”

China Cosco’s dry-bulk shipping volume fell 18 percent from a year earlier to 112 million tons. Revenue dropped 32 percent to 8.26 billion yuan. The company pared the size of its commodity-carrying fleet to 357 owned and leased ships at the end of June from 376 three months earlier.

“Excessive shipping capacity will remain the primary challenge” for the dry-bulk sector in the second half of the year, China Cosco said. The company had booked 63 percent of 2012 revenue-days as of June 30 at an average rate 29 percent lower than for 2011.

The Baltic Dry Index (BDIY), a benchmark for commodity-shipping rates, averaged 31 percent lower in the first six months of the year than a year earlier.

China Cosco, which also has a logistics business and a stake in container-terminal operator Cosco Pacific Ltd. (1199), fell 1.6 percent to HK$3.15 in Hong Kong yesterday before the earnings release. It’s slumped 18 percent this year, compared with a 7.35 percent gain for the benchmark Hang Seng Index.

The company’s container-shipping fleet had a first-half loss of 1.3 billion yuan, compared with 947 million yuan a year earlier. Its volumes on Asia-Europe routes rose 22 percent from a year earlier and by 15 percent of trans-Pacific lanes. Average rates on both sectors were little changed from a year earlier, according to Bloomberg calculations. The company had 166 container ships at the end of June, with another 22 on order.

Increasing competition may damp rates in the second half of the year and an oversupply of capacity will “worsen,” China Cosco said. The company also forecast a net loss for the nine months through September.

China Shipping Container had a first-half loss of 1.28 billion yuan, compared with a 630 million yuan loss a year earlier, because of higher fuel costs and lower average rates on Asia-Europe routes.

The price of 380 Centistoke Bunker Fuel, used by ships, averaged $695.58 per ton in Singapore trading in the first half, compared with $628.30 a year earlier, according to data compiled by Bloomberg.

To contact Bloomberg News staff for this story: Alexandra Ho in Shanghai at aho113@bloomberg.net

To contact the editor responsible for this story: Neil Denslow at ndenslow@bloomberg.net