Cosco Shipping

China Cosco shares fall as interim net loss set to grow

PUBLISHED : Tuesday, 31 July, 2012, 12:00am
UPDATED : Tuesday, 31 July, 2012, 12:00am

China Cosco, the listed subsidiary of the mainland's largest shipping firm, saw its share price fall more than 3.6 per cent yesterday after it warned of a first-half net loss of more than 4.14 billion yuan (HK$5.08 billion).

The firm's stock closed at HK$3.15, down 3.65 per cent, its lowest since October 10, according to Hong Kong stock exchange data.

The share slump came after the company said its net loss would widen by more than half from the 2.76 billion yuan net loss reported in the first half last year. It said the loss was due to a weak global economy, slower growth in China, excessive ship capacity and an imbalance in supply and demand in the shipping industry. China Cosco is due to report its interim results on August 29.

China Cosco, which controls the dry bulk, container shipping and terminals operations of China Ocean Shipping (Group), had already reported a net loss of 2.69 billion yuan in the first quarter this year.

Bocom International head of transport and industrial Geoffrey Cheng Bik-hoi said the share-price drop was unexpected even though the profit warning was not a surprise.

Cheng said investors might have seen the improvement in the container shipping market and compared China Cosco with other box lines, not realising it was heavily exposed to the dry bulk market, where rates were 'disappointing'.

In box trades, spot container freight rates between Shanghai and Europe climbed to about US$1,700 per 20-foot container in June, an increase of around US$1,000 compared with rates in January. Similarly, rates from Shanghai to the US west coast rose by about US$1,000 to US$2,400 per 40-foot box in the same period, according to data from the Shanghai Shipping Exchange.

But average charter rates for a large Capesize dry cargo ship carrying iron ore or coal plunged from US$14,993 per day at the start of January to just US$3,211 per day at the end of June, equivalent to less than half of daily operating costs.

Cheng forecast the dry bulk market would not start to recover before the end of next year as the number of new ships delivered started to tail off.

Macquarie shipping analyst Janet Lewis said China Cosco's container shipping operations were likely to have 'performed significantly better' in the second quarter. The company imposed a series of container rate increases from mid-March and also benefitted from lower fuel costs.