China Cosco cites market volatility as cause of losses
Stalling trade and slowing mainland economic growth behind shipping giant's financial woes
The president of China Cosco Holdings, advising that losses in the underlying operations of the country's biggest shipping company had extended to a fourth year, yesterday conceded he was "deeply bothered" by volatility in the shipping market.
"China Cosco has had its glory days because of shipping's cyclicality," Jiang Lijun said after the company, part of state-owned giant China Ocean Shipping Group, reported a 1.4 billion yuan (HK$1.77 billion) net loss from its operations. Helped by some 1.7 billion yuan in tax credits and government subsidies on the scrapping of old vessels, the firm eked out a 362.5 million net profit. Turnover increased 4 per cent to 64.4 billion yuan.
China Cosco once operated the world's largest dry bulk fleet, hauling iron ore and coal to power the world's fastest growing economy. To reap the bonanza rising from China's insatiable demand for commodities, the company chartered more than 200 ships from the spot market when the benchmark Baltic Dry Index was heading towards historical highs. Such efforts also gained Cosco a ticket into the Fortune 500 Global in 2007.
But a source of pride turned into a nightmare when the financial crisis struck, marked by stalling trade and slowing Chinese economic growth.
China Cosco haemorrhaged an average of 10 billion yuan a year in 2011 and 2012, mainly due to high-priced charters it paid during the market peak.
The company moved to pare billions of yuan of assets in exchange for one-time cash gains to save its listing status on the Shanghai stock market.