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Vessel delays on the cards for China Cosco

Vessel delays on the cards for China Cosco

Shanghai: China Cosco Holdings Co, the world's largest operator of dry-bulk ships, said it's in talks to delay or cancel orders for new vessels after slumping to a second-half loss on plunging freight rates, writes Bloomberg.
"The prospect for the dry-bulk shipping market remains dim," the shipping line said in an e-mailed statement late yesterday. It didn't say how many of the 58 commodity vessels on order it was trying to delay.

The company expects its dry-bulk traffic to tumble 44 percent this year as China's cooling economy saps demand for iron ore, a steelmaking ingredient. Shipping lines have probably already canceled orders for 260 vessels worldwide, according to Lloyd's Register, as they scale back growth back plans drawn up because rates crashed last year on the global recession.

"There is no sign of recovery yet," said Gideon Lo, an analyst at DBS Vickers Hong Kong Ltd. "China Cosco is likely to have a loss this year."

The Tianjin-based shipping line is also attempting to defer three of nine container vessels due this year to 2010, according to a stock exchange statement. China Shipping Container Lines Co., the nation's second-biggest cargo-box carrier after China Cosco, said late yesterday that it expects to report a first- quarter loss.

China Cosco slipped 3 percent to HK$6.15 in Hong Kong at 10:34 a.m. local time. China Shipping Container fell 3.1 percent to HK$1.90. The benchmark Hang Seng Index rose 0.6 percent.

China Cosco had a 3.5 billion yuan ($512 million) second- half loss, compared with an 18.5 billion yuan profit a year earlier, based on figures in its release.

The company had a 3.97 billion yuan loss in its full-year accounts from forward freight agreements that fell in value because of the plunge in rates. FFAs are contracts used to bet on changes in shipping or chartering costs. Annual profit fell 40 percent to 11.6 billion yuan, missing the 16.2 billion yuan median of 10 analyst estimates compiled by Bloomberg.

This year, the China Cosco's dry-bulk traffic, or the total distance it carries paid-for cargo, will likely tumble to 846 billion ton-miles from 1.5 trillion ton-miles last year, according to the statement.
As of Dec. 31, the shipping line had secured 18 percent of 2009 dry-bulk operational days at rates a third lower than last year's average. The Baltic Dry Index, a measure of commodity- freight rates, fell 92 percent last year, the biggest drop in at least two decades.

The company, controlled by China Ocean Shipping (Group) Co., had 443 dry-bulk vessels at the end of last year.
China Cosco's container-shipping arm may carry 5.2 million boxes this year, compared with 5.8 million last year. The shipping line will reduce capacity on major transpacific and Asia-Europe routes during slow seasons because of waning demand. As of Dec. 31, the company had a fleet of 141 container ships, with another 59 on order.  [23/04/09]

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