COSCO reports H1 loss of $432 million

The conglomerate says it has been hit by lackluster global economy

BEIJING - China COSCO (Ocean Shipping Group Co) Holdings Company, the country's top shipping conglomerate, on Friday reported a loss of 271 billion yuan ($432 million) for the first half of 2011, registering a massive decline of 176.8 percent year-on-year.

The deficit was mainly a result of the lackluster global economy, with demand in developed economies remaining flat while emerging markets are busy combating inflation, said Wei Jiafu, the company's chairman.

However, China's role in promoting global economic recovery with its ongoing processes of urbanization and industrialization is likely to lift the shipping industry in the long term, he said.

"We hope to see the market warm up as the world economy bounces back" in the second half of the year, Wei added.

The shipping industry, which acts as a barometer of world economic activity, has been affected by the fragile economic recovery.

The dismal market, plagued by the rising price of oil, overcapacity and fierce competition, has further strained the company's operations, said Zhang Liang, executive director.

During the first half, revenue from COSCO's container business declined 5 percent year-on-year.

The company's dry-bulk shipping business was most seriously affected by industry overcapacity, resulting in difficulties in raising charges. Revenue from the bulk shipping business fell 27 percent to 12.2 billion yuan during the period from a year earlier, according to the company.

"The current operating environment for bulk cargo-ship owners is worse than during the (2008) financial crisis," Zhang said.

The market for the second half of this year is expected to hot up as China develops its affordable housing program and Japan continues its post-earthquake reconstruction. These factors may help to drive up global demand, Zhang said.

Amos Zhang, an analyst at SWS Research Co Ltd, said he is optimistic about industrial recovery in the near future.

"The third quarter is always busy for the shipping industry. Industrial performance in container and bulk shipping are expected to recover a little," he said.

"But it is still difficult for the industry to digest the extra capacity. In the next two to three years, business in the container and bulk-shipping sector is likely to remain insipid," he added.

In the meantime, COSCO's businesses in logistics and port operation have generated profits. During the first six months, revenue from logistics surged by 71 percent year-on-year to 2.78 billion yuan.

During the same period, the container volume in the company's ports jumped by 19.7 percent year-on-year. The company is making a profit at Piraeus port in Athens, COSCO's Zhang said.

China Daily

(China Daily 08/27/2011 page9)