Carrier posts 'profit alert' as freight rates rise

PUBLISHED : Thursday, 20 January, 2011, 12:00am
UPDATED : Thursday, 20 January, 2011, 12:00am

China Shipping Container Lines, the second-largest container shipping company on the mainland, yesterday said it returned to the black last year after suffering a loss of 6.49 billion yuan (HK$7.66 billion) in 2009.

The reversal of fortune comes after China Cosco, the largest mainland shipping conglomerate, posted an alert earlier this month to report a substantial growth in revenue and a net profit for last year. This followed hefty losses in 2009.

Shares in CSCL last traded 3.1 per cent higher at HK$3.94 before they were suspended yesterday morning pending its own profit alert.

The stock has gained almost 30 per cent in the past month as investors have been betting on the company's recovery in view of improvements in the global seaborne trade and freight rates.

Transpacific freight rates have reached record highs on robust demand. Although freight rates eased in the past two quarters because of the European debt crisis and concerns over the US recovery, average freight rates last year were still significantly higher than those in 2009.

Current freight rates for Europe are 35 per cent below their peak in March. Those for the US West Coast are 31 per cent below their peak in July last year even after a 4 per cent rebound in average spot rates in the last week of last month - a rise that followed 25 straight weeks of decline.

'Freight rates are expected to stay at the current levels since the announced rate increase will be difficult to enforce,' said Peter Sand, a shipping analyst with the Baltic and International Maritime Council that represents about 900 international shipowners.

Most shipping lines failed to implement a proposed US$150 to US$200 rate increase on the Europe trade lane this month and hope to enforce it in March, said Jimmy Lam, an analyst at Daiwa Capital Markets.

'The rates on Europe routes for the year will fall below last year on average due to oversupply in the trade lane,' he said.

The outlook for intra-Asia trade and transpacific routes are relatively more lucrative than Europe trade, Lam said.