China Shipping expects boost from Shenhua deal

China Shipping Development, the country's biggest oil and coal carrier, said it may seal a long-term contract with Shenhua Group to ship more coal in a bid to boost its earnings after suffering a 19.4 per cent drop in net profit in the first half of the year.

Shenhua, China's largest coal producer and the unlisted parent of Hong Kong-traded China Shenhua Energy, may direct as much as 100 million tonnes of coal to China Shipping over roughly the next two years, said Li Shaode, the chairman of the shipping company, at a press conference in Hong Kong yesterday.

'That's why we dare to say our second-half result will [be better] than the first half,' Mr Li said. 'We now ship about 20 million tonnes for Shenhua.'

Word of the likely coal deal follows China Shipping's signing of a 10-year agreement last month under which it will ship crude oil for China Petroleum and Chemical Corp (Sinopec), Asia's largest refiner.

During the first year of that contract, China Shipping will transport between 3.5 million and 4.5 million tonnes of crude a year for Sinopec, rising to between 10 million and 12 million tonnes beginning in 2010.

To cope with the expected surge in demand, China Shipping plans to boost capital spending to 4.6 billion yuan this year. This will fall in subsequent years to 2.1 billion yuan next year, 1.8 billion yuan in 2008 and 1.2 billion yuan in 2009.