Shipping giant China Ocean Shipping Group (Cosco) swung into the red with a net loss of 4.48 yuan in the first quarter, as the shipping industry worldwide hit a new low on weak trade and falling commodities prices.
Cosco, which has just formed the world’s largest shipping alliance with three other major players this month to buffer the protracted downturn in the industry, blamed the loss on a steady decline in rates due to “severe imbalance of supply and demand”.
It had incurred a loss of 1 billion yuan in the same period last year but had managed to post a full-year profit of 283 million yuan thanks to government subsidies. Excluding one-offs from asset disposals, Cosco’s non-recurring loss in the first quarter was 2.14 billion yuan while operating revenue fell 19.6 per cent to 14.6 billion yuan.
CLSA analyst Daniel Meng said he was not surprised by Cosco’s losses. “The number is not small, but not extraordinarily big given its track record.”
During the first three months of the year, international freight rates as indicated by the Shanghai Containerized Freight Index (SCFI) fell 47 per cent year on year as excess capacity continues to plague the industry and oil prices languish. The SCFI hit 400.43 on March 18, the lowest since 2009. Baltic Dry Index, an index for dry bulk shipping, was 41.6 per cent lower year on year and 44 per cent lower quarter on quarter.