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China's two box majors report large losses

Article-China's two box majors report large losses

China's two box majors report large losses

Hong Kong: China COSCO Holdings, the country's largest shipping group, swung to a slightly smaller-than-expected net loss in the first half, and warned of a still tough second-half amid continuous decline of economy and trade.
"In the face of the significant over-supply and re-surging oil prices, it is expected that the operational conditions for the second half of the year will remain difficult," the company said on Thursday.
Analysts have said the freight market has begun to recover but the pace of a shipping industry upturn is likely to be slower than recovery of the world economy considering the long order books for new ships.
Drewry Shipping Consultants estimated global container volume to fall by 10.3 per cent in 2009 and global container fleet capacity is expected to grow by more than 10 per cent this year, China COSCO said.
China COSCO, which warned of a first-half net loss in July, reported a net loss of 4.59 billion yuan in Jan-June as the global recession took a toll on international trade, which badly hit sea transport volumes and rates.
The result was slightly better than a consensus forecast of 4.84 billion yuan loss from four analysts polled by Reuters and compared to a profit of 15.12 billion yuan a year ago.
Total revenue plunged nearly 60 per cent to 28.9 billion yuan from 70.57 billion yuan a year ago.
China Shipping Container Lines (CSCL), which vies with China COSCO as the world's sixth-largest operator of a container fleet, also posted a steep first-half loss on Thursday of 3.4bn RMB.
"There have been some improvements seen in the freight rates and China COSCO is expected to see a smaller loss in the second half than the first six months," Daiwa Securities analyst Geoffrey Cheng said.
But the Baltic Exchange's dry sea freight index (BDI) peaked for the year in June and a continual downtrend could require the company to make further provisions ahead, he added.
The BDI, which tracks prices to ship commodities such as iron ore and grains, jumped more than six fold to a high of 4,291 in June from a low of 663 points last December.
The index stood at 2,425 points on Thursday or just about one-fifth of its peak of 11,793 in May 2008.
China COSCO, which operates the world largest dry bulk fleet, shipped 4.8 per cent less dry bulk cargoes, or 129.3 million tonnes, in the first six months, it said.
Chinese shipping firms have also been badly hit due to wilting demand for made-in-China goods from European and U.S. consumers.
China COSCO's container volume dropped 22 per cent to 2.35 million twenty-foot-equivalent units (TEU) in the first half.
Shares of China COSCO ended down three per cent in Hong Kong on Thursday, but have risen 88 per cent so far this year, beating a 41 per cent gain in the benchmark Hang Seng Index.
China COSCO's Shanghai shares have also increased 91 per cent year to date.  [28/08/09]

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