Poor markets hit HK's shippers
Uncertain conditions in the container shipping and dry bulk cargo markets continue to affect the maritime sector, according to trading results posted by Hong Kong's leading shipping companies yesterday.
The worst affected was China Cosco Holdings, which plunged deeper into the red in the third quarter as poor results from its container and dry bulk subsidiaries reflected the impact of lower freight rates and container volumes.
The firm posted a net loss of 2.1 billion yuan (HK$2.6 billion) in the third quarter on top of the 2.7 billion yuan net loss sustained in the first half. These combined losses of 4.8 billion yuan led China Cosco to issue a profit warning yesterday for the full year which it partly blamed on 'the severe situation in the international dry bulk shipping market'.
China Cosco's container shipping operation, Cosco Container Lines, saw total revenue slump 21.3 per cent to 9 billion yuan in the third quarter despite a 14.2 per cent rise in container volumes to 1.89 million teu (20-foot equivalent units). This reflected the drop in average revenue per teu on key Asia-Europe, intra-Asia and transpacific trades.
Dry bulk volumes of key commodities, including coal and iron ore, slipped 1.75 per cent in the third quarter. Although no operating figures were given, China Cosco has been mauled by a large number of toxic charters on which it was paying more than US$50,000 per day for ships when the spot daily charter rate was down to US$10,000-15,000.
China Cosco was also hit by figures from its terminal subsidiary, Cosco Pacific, which saw net profit climb to US$331.5 million in the nine months to September 30, up from US$289.9 million in the same period last year. But net profit in the third quarter fell to US$94.5 million, down from US$100 million amid slower throughput growth.
Barclays Capital has forecast a full-year net loss of 3.98 billion yuan for China Cosco Holdings.
Jon Windham, head of the firm's industrial sector research for Asia, said China Cosco had already booked a 1.4 billion yuan loss against its chartered-in dry bulk ships. 'We would expect provisions to continue in the second half of 2011 and 2012 given the size of China Cosco's vessel operating leases and dry bulk freight rates,' he said. 'As of the second quarter 2011, China Cosco had 65 billion yuan of vessel operating leases outstanding.'
Tougher conditions also weighed on dry bulk shipowner China Shipping Development, which yesterday reported net profit of 815.2 million yuan in the nine months to September 30, down 44 per cent from 1.45 billion yuan in the period last year.
The company, which specialises in hauling coal, iron ore and grain on international and domestic routes, said it generated just 130.8 million yuan in net profit in the third quarter, against a 478.3 million yuan net profit from July to September last year.
Analysts said China Shipping's 72.6 per cent drop in profit reflected higher fuel costs and lower freight rates as the increase in vessel deliveries outpaced the increase in cargo demand to depress charter rates.
There were brighter prospects for Pacific Basin Shipping, which focuses on smaller Handysize and Handymax dry cargo ships of 28,000-55,000 deadweight tonnes.
The company said that freight rates for Handysize and Handymax bulk carriers had risen by 12 per cent and 22 per cent respectively since June 30, 'an earlier and stronger than anticipated improvement'.
On prospects, Klaus Nyborg, chief executive, said while there was 'evidence of softening Chinese demand for some commodities', the company expected this 'to be balanced by the seasonal resumption of fourth quarter US Gulf grain exports'.