• Fri
  • Apr 18, 2014
  • Updated: 11:34am

Sinotrans eyes used vessels to boost fleet

PUBLISHED : Friday, 14 March, 2008, 12:00am
UPDATED : Friday, 14 March, 2008, 12:00am

Strong demand for ore and coal spurs plan

Sinotrans Shipping, whose profits rose 18.4 per cent last year, may buy second-hand vessels and acquire a small shipping company to expand its bulk vessel fleet given the country's strong demand for iron ore and coal, its chairman says.

The company expected its new bulk ships to be delivered next year but until then would resort to the second-hand market or even buy a small shipping company, Zhao Huxiang said yesterday.

Mr Zhao gave no timetable, but analysts said cancellations of ship orders could occur in the second half, when the credit crunch hits some shipping companies.

'Sinotrans may have to wait until the second half to shop in the secondary market when most of the new vessels are due for delivery,' said a shipping analyst.

Mr Zhao said prices for both new and second-hand ships were high right now. 'We will act after serious consideration and will take into account our own financial condition,' he said.

While the company was waiting for vessel prices to come down, analysts said it might be disappointed. Given that demand and supply in capacity is balanced this year, prices might not fall too low, they said.

The shipping company will take delivery of four container vessels and one very large crude carrier (VLCC) this year.

For this year, Sinotrans Shipping said it had covered nearly 70 per cent of its revenue days with daily rates increasing 50 per cent.

However, it did not provide the exact figure on revenue days, which depended on the number of vessels deployed.

Mr Zhao is confident that Sinotrans' underperforming tanker operation will do better this year after taking delivery of a double-hull VLCC.

The company's two single-hull tankers incurred deficits last year because of soft freight rates and weak demand as the type of vessel is susceptible to oil leaks in a collision.

Sinotrans said it would convert one of the single-hulled ships into a double-hull this year.

Sinotrans posted an 18.4 per cent increase in net profit for last year to US$140.9 million, its first result announcement since listing in November. Stripping off a US$11.1 million one-off interest income from its initial public offering, net profits increased 9 per cent from a year earlier.

Net margin fell to 44.5 per cent last year from 48 per cent due to bad results in the tanker division. The average daily time charter rate for Sinotrans oil tankers slipped 44.4 per cent to US$25,295 last year due to overcapacity in the market.

Sales derived from oil tankers fell 29.6 per cent to US$31.2 million last year. However, tanker rates have rebounded since November last year and will continue to climb in the first two months.

Dry bulk shipping, the primary operation of the company, posted a 32 per cent jump in sales to US$204.6 million last year as Sinotrans' average daily time charter rate increased 40 per cent.

The company's charter rate was US$23,151 per day last year.

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