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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, said he was "deeply bothered" by volatility in the shipping market.
"China Cosco has had its glory days because of shipping's cyclicality," said Jiang Lijun after the company, part of state-owned giant China Ocean Shipping Group, reported a $228 million net loss from its operations. Helped by some $273 million 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 percent to $10.3 billion.
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.
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China Cosco lost an average of $1.6 billion 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.
Its dry bulk fleet shrank by a third by the end of last year to 255 ships, with the company quietly shedding the title of industry No1. Commodities shipping volumes plummeted 17 percent.
"Dry bulk and container shipping and port operations - we are deeply troubled by the imbalanced composition of our business and the lack of counter-cyclical income streams. There were many opportunities we could have nurtured five to 10 years ago," Jiang said. "But now it has all become too difficult."
Most industry analysts have forecast that China Cosco will continue to run at a loss in 2015. "Dry bulk is going to be China Cosco's overhang for a long time," said Geoffrey Cheng, transport analyst at Bocom International.
For more of the South China Morning Post story: www.scmp.com
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