China Shipping to lift rates after 98.7pc profit dive

PUBLISHED : Friday, 27 March, 2009, 12:00am
UPDATED : Friday, 27 March, 2009, 12:00am

China Shipping Container Lines, the mainland's second-largest container shipping company, said it is seeking to resume freight rate increases from April after posting a 98.67 per cent drop in net profit last year.

Shipping companies are feeling the impact of weaker demand for consumer goods from the United States and Europe amid the global financial turmoil.

'Freight rates at current levels are unbearable,' said managing director Huang Xiaowen at a press conference yesterday. The company had implemented rate rises on the Middle East routes and planned to increase rates on Europe and transpacific journeys by as much as 100 per cent, he added.

Net profit dropped to 42.97 million yuan (HK$48.8 million) last year from 3.23 billion yuan a year earlier. No final dividend was recommended in the period.

The earnings were below the HK$77.05 million mean estimate of a Thomson Reuters poll of 13 analysts.

Shares in the company rose 9.7 per cent to HK$1.47 yesterday on news of the rate increase plan.

China Cosco Holdings, Orient Overseas (International) and China Shipping Development also rose yesterday.

Joining the efforts of other shipping companies, Mr Huang said the company aimed to increase rates on Europe routes by 100 per cent to US$700 per 20-foot equivalent unit (teu) from April. The transpacific freight rate would go up by US$450 from US$1,200 per 40-foot equivalent unit from May while South America routes would rise by US$500 from US$1,100, he added.

Sales at China Shipping decreased 11 per cent to 34.76 billion yuan on a 4.9 per cent drop in lifting and the slump in freight rates.

Amid the weak demand, the company will get rid of 4,000 teu of capacity from its 493,000-teu fleet this year by redelivering the charter-in vessels.

The group will not take delivery of any new vessels until 2011, save for an 8,500-teu vessel to be delivered next month.