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China’s largest shipping company COSCO (Ocean Shipping Group Co) Holdings last week reported a loss of 271 billion yuan (USD$432 million) for the first half of 2011, registering a massive 176.8% decline year-on-year, according to China Daily.

The deficit was mainly a result of the lacklustre global economy, with demand in developed economies remaining flat while emerging markets are busy combating inflation, Wei Jiafu, the company’s chairman was quoted saying.

However, over the long term, the shipping industry is likely to be lifted by China’s role in promoting global economic recovery with its ongoing processes of urbanisation and industrialisation, Wei said.

The shipping industry, which acts as a barometer of world economic activity, has been affected by the fragile economic recovery.

The company’s operations was strained by the dismal market which was plagued by the rising oil prices, overcapacity and fierce competition, Zhang Liang, the company’s executive director said.

During the first half, revenue from COSCO’s container business declined 5% year-on-year.

The company’s dry-bulk shipping business was most seriously affected by industry overcapacity, resulting in difficulties in raising charges. Revenue from the bulk shipping business fell 27% to 12.2 billion yuan during the period from a year earlier, according to the company.

Zhang said the current operating environment for bulk cargo-ship owners is worse than during the (2008) financial crisis.

The market for the second half of this year is expected to improve as China develops its affordable housing program and Japan continues its post-earthquake reconstruction. These factors may help to drive up global demand, Zhang said.

Amos Zhang, an analyst at SWS Research Co Ltd, the third quarter is typically busy for the shipping industry. Industrial performance in container and bulk shipping are expected to recover a little, he said.

“But it is still difficult for the industry to digest the extra capacity. In the next two to three years, business in the container and bulk-shipping sector is likely to remain insipid,” he added.

In the meantime, COSCO’s businesses in logistics and port operation have generated profits. During the first six months, revenue from logistics surged by 71% year-on-year to 2.78 billion yuan.

During the same period, the container volume in the company’s ports jumped by 19.7%. The company is making a profit at Piraeus port in Athens, COSCO’s Zhang said. Source: ChinaDaily


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