China Cosco Holdings Co., the nation’s largest shipping line, predicted a full-year loss because of plunging rates for carrying commodities and containers, according to Bloomberg.
The “declining international shipping market, especially the severe situation in the international dry-bulk shipping market” has hurt earnings, the Tianjin-based company was reported saying. It didn’t give a loss forecast. It reported a 2.1 billion yuan (US$330 million) loss for the third quarter.
Chairman and Chief Executive Officer Wei Jiafu, 61, will become non-executive chairman as Cosco contends with global overcapacity that has hammered freight rates. The company’s average container rates fell 26 % on transpacific routes from a year earlier in the third quarter and by 41 % on Asia-Europe services, according to Bloomberg calculations.
“The dilemma for container-shipping lines now is that the more cargo you carry, the more money you lose,” Huang Wenlong, a Hong Kong-based analyst with BOC International Holdings Ltd., said before the earnings announcement. A recent pick-up in dry- bulk rates is also “unsustainable,” he said.
China Cosco plans to idle container ships if there’s no improvement in the market, Xia Yongjian, an official at the container shipping unit’s strategic development department, said on a conference call with analysts today.
The shipping line’s shares declined 3.8% to HK$4.26 at the close in Hong Kong trading. The stock slumped 47% in third quarter and has since surged 31% on speculation an economic rebound may revive trade.
Sales at China Cosco’s container-shipping unit slumped 21% in the third quarter even as volumes rose 14%. Asia-Europe sales fell 33%, while volumes climbed 13%.
China Cosco, China Shipping Container Lines Co. and other lines delayed peak-season surcharges on Asia-US routes in the third quarter because of an expanding global fleet and as economic concerns damped demand for back-to-school and holidays goods. China Shipping posted a net loss of 951 million yuan in the period. More at Bloomberg