China Shipping (Group) Company (CSC), the nation's second-largest shipowner after COSCO Group, may join forces with its Hong Kong-listed subsidiary China Shipping Development Co Ltd (CSD) to set up a new company for hauling coal, iron ore and other bulk commodities, the subsidiary announced on the Hong Kong stock exchange yesterday.

Both utilities are expected to inject part of their assets concerning dry bulk cargo such as coal and ore transport into the new company.

"Relevant shares (of the new company) may be sought to be separately listed on the stock exchange," it said.

The Hong Kong-listed company said no definite proposal has been finalized and the proposed restructure "may or may not proceed."

The new company's fleet may include 73 bulk carriers owned by CSD and the 72 belonging to its Shanghai-based parent, Bloomberg reported, citing Karen Chan, an analyst at Credit Suisse First Boston. "A company combining all 145 vessels may be valued at US$2 billion," it said.

Through the possible restructuring, the shipping group company will boast three subsidiaries which already include China Shipping Container Lines Co Ltd and China Shipping Development.

The expected coming together is largely the company's intention to re-arrange its internal assets within the conglomerate, and will have some negative effect on the subsidiary's business performance, said Li Lei, an industry analyst in shipping with Beijing-based China Securities.

"The Hong Kong-listed CSD, after selling its dry bulk cargo business, is forecast to see its profits shrink, as that accounts for some 40 per cent of the listed shipowner's sales revenue, which relies on oil transport for the remaining 60 per cent," Li said.

There is still a risk the potential listing of the new company will fail after the restructuring of the group company's internal assets, according to Li, because the dry bulk cargo business, despite a strong momentum over the past two years, is expected to slump next year.

"But the market speculation is not likely to exert a deadly threat on the new company's listing plan if the IPO is scheduled next year, as the revaluation of the company's business performance will be mainly based on this year's results," he added.

CSD earned 2.12 billion yuan (US$256 million) for its main business in the first quarter, in which the oil transport business contributed 1.17 billion yuan (US$141 million), up 28.1 per cent year-on-year benefiting from the booming market.

The company said its aggregated net income for the first six months of the year is expected to witness a 50 to 100 per cent rise from the same period of last year, mainly due to rising demands and intensified transport capacity of the shipowner.

China Shipping Development's shares fell as much as 3.3 per cent to HK$5.85 (75 US cents) yesterday on the Hong Kong stock exchange.

(China Daily 06/17/2005 page11)