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CIMC warns of slowing growth, trade war issues during rest of 2018

China International Marine Containers (CIMC) saw in the first half, steady growth in its key container manufacturing business while other segments of the now highly diversified group did less well as the offshore segment for example, continued to suffer from the prevailing oil and gas market slackness.

Pointing to steady growth in world trade and accompanying increase in container shipping in the first half of 2018, CIMC said: “Customers maintained strong procurement demand for new containers given higher market demand. Container prices remained stable as a result of the relatively balanced supply-demand in the container manufacturing industry.”

Not only did overall sales volume and revenue of containers maintain favourable demand growth, the group also significantly increased market share, especially in the reefer container business.

First half sales volume of ordinary dry containers rose 51% to 806,900 from 535,700 in the previous corresponding period. Meanwhile sales volume of reefer containers more than doubled to 76,600 teu from 35,100 teu previously.

However although revenue rose 60% to RMB16.1bn ($2.4bn) segment net profit fell 69% to RMB213.6m mainly due to high cost of water-based paint used in coating lines and rising steel prices. This was a similar situation to that faced by rival container maker Singamas Container Holdings which reported results last week and turned in a $2.1m loss for the period.

Likewise in line with the broader market, CIMC’s offshore engineering segment saw a sluggish performance “affected by characteristics of the offshore engineering equipment industry and reasons such as new orders acquired but not yet entering construction stages and the postponed delivery of orders on hand”, CIMC said.

First half revenue not only plunged 35% to RMB788.2m but net loss also widened to RMB705.6m from RMB550.4m previously.

Read More: Singamas keeps wary eye on trade war, higher costs amid H1 loss

Looking ahead, CIMC sees the global economy continuing to recover moderately in the second half of 2018. “However, the fact that the global trade environment is increasingly harsher brings uncertainties to the global economic recovery,” it warned.

Specifically for the container manufacturing business, CIMC noted: “The growth in trade slowed slightly compared with last year but remains at a relatively high level in recent years.”

The world’s top container manufacturer however pointed out that high oil prices are expected to lead to lower operating results for container lines this year and “this will, to some extent, affect customers’ willingness to purchase containers”.

It concluded that “however, it is expected that demand for containers will remain relatively high throughout the year”.

For its offshore engineering business, CIMC said offshore oil and gas development activities will further increase; market supply and demand continues to improve, and utilisation rate of drilling platforms continues to recover in the second half.

“However, oversupply still exists in the current market, and substantial rebound in rentals is hard to achieve in the short term. Given the limited demand for building new drilling platforms and offshore engineering ships for oil and gas development purpose, floating production platforms and offshore engineering ships for non-oil and gas development purposes will account for the majority of orders for a certain period to come,” CIMC concluded.

The building US-China trade war also loomed large in its view of prospects for its small but growing logistics service business. “In the second half of 2018, the trade war between the US and China will continue to escalate, and the anti-trust, anti-subsidy and anti-dumping investigations launched by the Trump administration against China will have an impact on the import and export business, while uncertainties for foreign trade and the import and export business still loom large,” CIMC warned.