By Bloomberg News - Aug 30, 2012 6:47 AM GMT+0400
China Cosco Holdings Co. (1919) and China Shipping Container Lines Co. (2866), the nation’s two largest listed ship operators by sales, both dropped the most in about a month in Hong Kong trading after reporting wider first-half losses.
China Cosco declined as much as 3.2 percent to HK$3.05 after yesterday saying its loss widened to 4.87 billion yuan ($767 million). Its dry-bulk and container-shipping units both posted larger losses than a year earlier. CSCL fell as much as 5.1 percent as of 10:12 a.m. after its first-half loss doubled.
China Cosco, which also has a logistics business and a stake in container-terminal operator Cosco Pacific Ltd., fell 1.6 percent to HK$3.15 in Hong Kong yesterday before the earnings release. Photographer: Jerome Favre/Bloomberg
The two companies both said overcapacity in container- shipping was likely to continue after a glut of vessels sapped rates in the first half limiting their ability to pass on higher fuel costs. China Cosco, based in Tianjin, also forecast continued “excessive” supply in the commodities-shipping sector after overcapacity caused rates to average 31 percent lower than a year earlier, based on the Baltic Dry Index.
“Dry-bulk shipping remains in severe oversupply.” Citigroup Inc. analysts Vivian Tao and Alan Wang said in a note today. In the container sector, “capacity management needs to be a lot more aggressive in order to restore the demand and supply relation.”
They cut their target price for China Cosco to HK$2.59 from HK$3.15, revised their full-year earnings forecast to a loss, and reiterated a sell rating.
China Cosco’s dry-bulk shipping unit widened its loss to 3.42 billion yuan in the first half from 2.7 billion a year earlier. The container-shipping fleet, China’s biggest, had a loss of 1.3 billion yuan, compared with 947 million yuan a year earlier.
Dry-Bulk Shipping
The company’s dry-bulk shipping volume fell 18 percent from a year earlier to 112 million tons. Revenue dropped 32 percent to 8.26 billion yuan. The company pared the size of its commodity-carrying fleet to 357 owned and leased ships at the end of June from 376 three months earlier.
“Excessive shipping capacity will remain the primary challenge” for the dry-bulk sector in the second half of the year, China Cosco said in a statement. The company had booked 63 percent of 2012 revenue-days as of June 30 at an average rate 29 percent lower than for 2011.
The Baltic Dry Index (BDIY), a benchmark for commodity-shipping rates, averaged 31 percent lower in the first six months of the year than a year earlier.
Container Volumes
China Cosco’s container volumes on Asia-Europe routes rose 22 percent from a year earlier and by 15 percent on trans- Pacific lanes. Average rates on both sectors were little changed from a year earlier, according to Bloomberg calculations. The company had 166 container shipsat the end of June, with another 22 on order.
Increasing competition may damp rates in the second half of the year and an oversupply of capacity will “worsen,” China Cosco said. The company, which also has a logistics business and a stake in container-terminal operator Cosco Pacific Ltd. (1199), forecast a net loss for the nine months through September
China Shipping Container had a first-half loss of 1.28 billion yuan, compared with a 630 million yuan loss a year earlier, because of higher fuel costs and lower average rates on Asia-Europe routes.
The price of 380 Centistoke Bunker Fuel, used by ships, averaged $695.58 per ton in Singapore trading in the first half, compared with $628.30 a year earlier, according to data compiled by Bloomberg.
To contact Bloomberg News staff for this story: Alexandra Ho in Shanghai ataho113@bloomberg.net
To contact the editor responsible for this story: Neil Denslow at ndenslow@bloomberg.net
