Cosco president warns of carrier overcapacity

PUBLISHED : Thursday, 31 March, 2011, 12:00am
UPDATED : Thursday, 31 March, 2011, 12:00am

Wei Jiafu, head of China's largest shipping company, criticised shipowners for continuing to order large numbers of ships when the industry was reeling from overcapacity.

While the president and chief executive of China Ocean Shipping (Group) did not name individual carriers, Wei (pictured) obliquely referred to plans by Taiwan's Evergreen Marine to order up to 100 container ships. He also mentioned Maersk Line's decision to order up to 30 18,000-teu (20-foot equivalent unit) container vessels, which will be the largest box vessels afloat when the first 10 are delivered from 2013.

'We think the whole industry should do something to control capacity,' Wei said yesterday at the annual results briefing for China Cosco Holdings, Cosco's container shipping, dry bulk, logistics and terminals subsidiary.

China Cosco has 38 container ships totalling 313,526 teu due for delivery by 2014, including 28 owned ships of 191,800 teu, while 18 dry-cargo bulk vessels of 2.7 million deadweight tonnes are also on order.

But Wei said the company had placed no new orders in the past two or three years. 'We think our behaviour is that of a responsible shipping company ... A responsible shipping company should control capacity growth all the time.'

Wei also sidestepped a question about further asset injections into China Cosco including Cosco's tanker business. He said the process to build China Cosco had 'not stopped' but 'we don't have anything further to announce'.

This came as Xu Zunwu, general manager of China Cosco's dry-bulk division, said the company faced a challenging dry-cargo market with forecast global ship capacity growth of 13 per cent this year. By comparison, cargo volumes are only expected to grow by 6 per cent.

Turning to the container sector, where spot rates on China-Europe services have fallen to US$992 per teu, Dr Sun Jiakang, managing director of Cosco Container Lines, forecast a difficult first half this year. But he was confident of a recovery in freight rates in the final six months. 'In general, this year will still be healthy for container ships.'

The executives were speaking after Zhang Liang, executive director and general manager, said China Cosco saw a net profit of 6.86 billion yuan (HK$8.13 billion) last year, compared with a 7.47 billion yuan net loss in 2009.

Total revenue climbed 40.9 per cent to 96.44 billion yuan from 68.46 billion yuan a year earlier.

Container shipping was the biggest contributor, generating 3.6 billion yuan in pretax profit on revenue of 46.34 billion yuan. The dry-bulk division reported a pretax profit of three billion yuan on revenue of 32.8 billion yuan.