China Shipping Development, one of the country's major shipping conglomerates, said it was heading into more challenging waters in the second half after reporting a 60 per cent increase in interim net profit.
But the company said it had prepared for freight rate volatility in the bulk shipping market by setting up more long-term contracts with mainland power plants and coal mines.
China Shipping recorded net profit for the first six months of 979 million yuan (HK$1.1 billion) following sales of 5.53 billion yuan, a year-on-year increase of 34 per cent thanks to a 25 per cent rise in shipping volume.
The Baltic Dry Index (BDI), the indicator of the charter rates for various bulk vessels, has had a roller-coaster ride so far this year, dropping to as low as 1,600 points in July after reaching a high of more than 4,000 points in May. It closed at 2,515 points on Tuesday.
'We ought to brace ourselves for a rough market for the second half,' said chairman Li Shaode at a press conference yesterday. 'It is possible that freight rates will experience a further dip in the second half. We have prepared for them falling back to 1,600 in the next six months.'
The prospects for bulk shipping in the second half are clouded by an excess supply of new vessels and the slowdown in demand growth for iron ore and coal from China, said Karen Chan, transport analyst at RCM.