Cosco Shipping

Cosco pays up to settle dispute over lease contracts with Jinhui

PUBLISHED : Friday, 02 September, 2011, 12:00am
UPDATED : Friday, 02 September, 2011, 12:00am

China Ocean Shipping (Group), the mainland's largest shipping company, paid an unspecified amount of money to Jinhui Holdings to settle a dispute over lease payments.

The move follows recent rows between Cosco, its Hong Kong-listed subsidiary China Cosco Holdings and international shipowners over unpaid or partially paid charter hire for ships Cosco companies leased.

But while Jinhui has reached settlement, one European shipowner received an e-mail this week from Cosco seeking to renegotiate its charter agreements.

The disputes meant shipbrokers, which arranged the Cosco charters, may also be owed millions of dollars in unpaid commissions by Cosco companies.

One estimate suggested one broking house alone was owed US$20 million in unpaid fees and commissions, which typically should have been paid every two weeks during the life of each charter.

This would affect shipbroking houses such as Clarkson and Braemar Seascope, whose officials were not available for comment.

One broker said Cosco recently imposed a cap of US$50,000 per day on all lease payments as it sought to curb massive losses at its dry bulk cargo operations. Charter payments above this cap were withheld or only partially paid while charters below were paid normally.

Cosco also sought to renegotiate contracts with some shipowners, which responded with threats to take legal action.

Zhang Liang, China Cosco's president, said during the firm's results briefing last week charter disputes 'were a common business problem'.

Cosco's problems arose after it leased ships on long-term charter during the height of the commodities boom in 2008 when the daily rate for a 180,000 dwt Capesize vessel was more than US$200,000. The rate is now US$30,000 following the collapse of the dry bulk market.

Jinhui vice-president Raymond Ching Wei-man confirmed the company had been paid its outstanding charter hire, but declined to comment further.

Ching had earlier said there had been unfriendly correspondence between Jinhui and Cosco over the payments.

In Jinhui's half-year report published on Tuesday, chairman Ng Siu-fai said that 'no restructuring or renegotiation of contract terms' that would jeopardise, reduce or disrupt the firm's expected or contracted income stream had taken place.