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Saturday 26 September 2009
China Cosco warns of industry losses, cancels orders
China Cosco Holdings, which is in talks with shipyards to recall orders for ships after cancelling eight bulk vessels in July, said the container shipping industry would continue to lose money next year.
China Cosco warns of industry losses, cancels orders
Charlotte So 25 September 2009
China Cosco Holdings, which is in talks with shipyards to recall orders for ships after cancelling eight bulk vessels in July, said the container shipping industry would continue to lose money next year.
The industry has been battered by the global economic downturn, which has sharply reduced imports and exports, at a time when new container vessels pour into the market, pushing freight rates down.
“Container shipping will remain very difficult next year as there are still uncertainty factors in the recovery,” Zhang Yongjian, the secretary of the board of Cosco, said in Hong Kong yesterday.
“We will try to minimise the loss from the sector and offset the loss by the profit generated from bulk shipping.”
Cosco’s container shipping sector lost 4.3 billion yuan (HK$4.88 billion) in the first half with the whole company reporting a net loss of 4.6 billion yuan in the period.
Bulk shipping was in better shape than the container segment because the demand for raw materials would be at the forefront of economic recovery, Zhang said.
All transpacific routes and most of the Asia-Europe routes were operating at a loss even though freight rates increased 30 to 40 per cent on transpacific routes and doubled in European routes during the third quarter, said Huang Xiaowen, the managing director of China Shipping Container Lines, the smaller rival of Cosco.
Freight rates needed to rise US$300 per 40-foot equivalent unit on transpacific routes and US$150 on European routes from present levels for companies to break even, Huang said.
“There is a greater chance for transpacific routes to raise rates since the peak season will last until the beginning of November,” he said. In contrast, the likelihood European routes will see rate increases is slim since the peak season is approaching an end.
Freight rates next year would be more stable but it was still difficult to tell whether shipping lines could turn around, Huang said.
The all-in container freight rate on the Asia-Europe routes at one time was US$300 per 20-foot equivalent unit this year, down from US$2,500 last year, and has risen to about US$1,300 now.
Talks were being held between Cosco and shipyards on the mainland and in South Korea and Japan over the cancellation of vessels, said Ming Dong, the company’s general manager of investor relations.
The company said it would cancel some container vessels scheduled for delivery next year and in 2011, but talks were continuing. Bulk vessel orders are also under review.
In the first five months, 492 vessels were cancelled worldwide, according to a Norwegian shipyard study. In some cases, shipyards agreed to return all of the 20 per cent down payment to shipowners. In others, the payment will be forfeited in full or in part. It depended on the shipping company’s relationship with the shipyard, Ming said.
“We would like to receive all the down payment as we are a vital customer to the shipyards,” Ming said.
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China Cosco warns of industry losses, cancels orders
Charlotte So
25 September 2009
China Cosco Holdings, which is in talks with shipyards to recall orders for ships after cancelling eight bulk vessels in July, said the container shipping industry would continue to lose money next year.
The industry has been battered by the global economic downturn, which has sharply reduced imports and exports, at a time when new container vessels pour into the market, pushing freight rates down.
“Container shipping will remain very difficult next year as there are still uncertainty factors in the recovery,” Zhang Yongjian, the secretary of the board of Cosco, said in Hong Kong yesterday.
“We will try to minimise the loss from the sector and offset the loss by the profit generated from bulk shipping.”
Cosco’s container shipping sector lost 4.3 billion yuan (HK$4.88 billion) in the first half with the whole company reporting a net loss of 4.6 billion yuan in the period.
Bulk shipping was in better shape than the container segment because the demand for raw materials would be at the forefront of economic recovery, Zhang said.
All transpacific routes and most of the Asia-Europe routes were operating at a loss even though freight rates increased 30 to 40 per cent on transpacific routes and doubled in European routes during the third quarter, said Huang Xiaowen, the managing director of China Shipping Container Lines, the smaller rival of Cosco.
Freight rates needed to rise US$300 per 40-foot equivalent unit on transpacific routes and US$150 on European routes from present levels for companies to break even, Huang said.
“There is a greater chance for transpacific routes to raise rates since the peak season will last until the beginning of November,” he said. In contrast, the likelihood European routes will see rate increases is slim since the peak season is approaching an end.
Freight rates next year would be more stable but it was still difficult to tell whether shipping lines could turn around, Huang said.
The all-in container freight rate on the Asia-Europe routes at one time was US$300 per 20-foot equivalent unit this year, down from US$2,500 last year, and has risen to about US$1,300 now.
Talks were being held between Cosco and shipyards on the mainland and in South Korea and Japan over the cancellation of vessels, said Ming Dong, the company’s general manager of investor relations.
The company said it would cancel some container vessels scheduled for delivery next year and in 2011, but talks were continuing. Bulk vessel orders are also under review.
In the first five months, 492 vessels were cancelled worldwide, according to a Norwegian shipyard study. In some cases, shipyards agreed to return all of the 20 per cent down payment to shipowners. In others, the payment will be forfeited in full or in part. It depended on the shipping company’s relationship with the shipyard, Ming said.
“We would like to receive all the down payment as we are a vital customer to the shipyards,” Ming said.
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