China Shipping Development, one of the mainland's largest oil and commodities shipping groups, said a capacity glut and high oil prices will continue to cast a pall over the shipping industry in 2012.
The company's 2011 net profit dropped 39 per cent year on year to 1.05 billion yuan (HK$1.28 billion) due to plummeting freight rates for crude oil. Sales rose 8 per cent year on year to 12.1 billion yuan.
Industry sources expect the demand for crude oil shipment to rise less than 5 per cent this year, outstripped by an 8.4 per cent capacity increase. The capacity for bulk shipping is expected to rise 10 per cent while demand is only tipped to rise 3.5 per cent.
Unlike its international peers, China Shipping has signed long-term contracts with state-owned refineries and steel mills to offset the volatility in the market. It also shrugged off the impact of international sanctions against Iran, a major oil producer, and general manager Yan Zhichong said the group would continue to ship Iranian crude oil to China.
It ships about 3 million tonnes of crude oil from Iran annually, accounting for 30 per cent of Iran's total oil shipments to China.
Despite the capacity glut, the company said it would take delivery of 44 new vessels, equivalent to an 18 per cent increase in its total capacity.
