China Cosco Holdings, the world's biggest operator of bulk shipping vessel, announced yesterday a worse than expected 40.4 per cent decline in net profit for last year because of a slump in freight rates. The shipping conglomerate, also the sixth-largest operator of container vessels and fifth-biggest port operator, said net profit fell to 11.62 billion yuan (HK$13.19 billion) from 19.48 billion yuan, missing the HK$19.34 billion mean estimate by Thomson Reuters. Revenue rose 16.6 per cent to 130.87 billion yuan from 112.23 billion yuan. The company proposed a final dividend of 29 fen per share, compared with 18 fen in 2007. 'The decrease in demand from US imports and exports led to a decrease in the shipping volume on transpacific routes,' the company said. 'European economies were also affected, causing a slowdown in the growth of shipping volume on Asia-Europe routes and a sharp decline in freight rates.' Spot rates for capesize vessels, those at more than 150,000 deadweight tonnes, peaked at US$233,988 per day on June 5 and plunged 99 per cent to US$2,316 on December 2 as demand for shipping dried up amid the global recession. The Baltic Dry Index, which tracks charter rates on varied bulk vessels, plummeted to 663 points on December 5, the lowest level since June 1985, only seven months after hitting a record high on May 20. China Cosco operated 81 capesize vessels and 351 bulk ships of other classes as of the end of June. The decline in freight rates for bulk shipping helped wipe out China Cosco's profit in the first half. Interim net profit rose 109 per cent from a year earlier to 15.12 billion yuan. The company also said yesterday it had covered 18.4 per cent of the projected revenue days this year at a contracted freight rate that was 33 per cent below last year's level. Sales at its bulk shipping division increased 34 per cent to 71.6 billion yuan on a 10.7 per cent increase in volume to 293.1 million tonnes. Like airlines, China Cosco also entered into forward contracts to hedge against volatile freight rates. However, the abrupt change in freight rates has left the company incurring a 5.38 billion yuan paper loss from forward freight agreements. As of the end of December last year, China Cosco's outstanding forward freight agreements amounted to 278 million yuan, while the liability related to such agreements reached 3.96 billion yuan. Operating costs jumped 20 per cent to 86.55 billion yuan, mainly because of the 26.6 per cent increase in fuel costs. The fuel bill was 10.15 billion yuan last year, accounting for 27.8 per cent of total costs. China Cosco's container leasing and port operating unit, Cosco Pacific, earlier reported a 2 per cent drop in underlying profit last year because of the decline in global trade during the fourth quarter. Shares in China Cosco sank 7.58 per cent to HK$6.34 yesterday before the company announced its annual results. 'The trend of slowdown in both international and domestic logistics demand is expected to continue this year,' the company said.