China Cosco Holdings Co., battered by high costs under contracts signed at the peak of the market in 2008, plans to restructure its dry-bulk shipping operations, as the nation's biggest shipping company moves to strengthen its unprofitable business amid a global downturn and industry overcapacity.
A China Cosco official said Thursday that the company, the publicly traded flagship of state-owned China Ocean Shipping (Group) Co., has yet to finalize the changes, adding only that the move will involve China Cosco's units that operate its dry-bulk ships, which carry commodities including coal, grain and iron ore. China Cosco is listed in Hong Kong and Shanghai.
"The company is planning to restructure its dry-bulk operations in Hong Kong, Tianjin and Qingdao," the official said.
The plans come after China Cosco posted a first-half net loss of 2.71 billion yuan (US$424.7 million) last week, because of lower freight rates and high fuel costs.
Foreign demand for Chinese-made goods, coupled with strengthening domestic consumption in China, have fueled strong growth for China Cosco's shipping business, which includes container shipping, port operations and shipping-agency operations.
But lower freight rates because of overcapacity and weakening trade demand this year are clouding the outlook for the Beijing-based company, which went public in 2005 as its parent sought to showcase its core assets.
Global demand for commodities has been easing since the start of the year as Asian countries, and China in particular, adopt tightening economic policies to rein in high inflation, leading to slower growth for dry-bulk shipping volume.
China Cosco, which has about 200 dry-bulk ships under charter and owns 234, earlier this year stopped paying fees on some ships it leased before 2009 from Chinese and Greek ship owners, triggering the seizure of three ships. Moody's rating service warned that the company's action could hurt the ability of dry-bulk ship owners to get credit. The company has resumed its payments, some ship owners {非本站网址}sco Holdings posted weak first-half results last week, just days after parent Cosco Group said Ma Zehua, vice president at rival China Shipping Group, will return to the state-owned company as managing director of its newly created board.
Cosco Holdings' president, Zhang Liang, said Aug. 26 that the company had negotiated new agreements with ship owners affecting 18 dry-bulk-vessel leasing contracts that were signed at the peak of the market, but declined to disclose the new terms. The Baltic Dry Index, a key measure of dry-bulk shipping rates, is now down nearly 90% from its peak in May 2008.