COSCO loss grows; CSCL rebounds

Shanghai-listed China COSCO Holdings Co expanded its losses for the nine months ended September and is at risk of being listed as ST (special treatment) stock, while its peer China Shipping Container Lines Co (CSCL) reversed a downtrend and recorded a profit.

COSCO, the leading domestic shipping company lost 1.53 billion yuan ($245 million) in the third quarter, following its first-half deficit of 4.87 billion yuan, according to its third-quarter financial report posted on the Shanghai Stock Exchange Wednesday.

"We will be a money-losing company for the whole of 2012 due to overcapacity in the shipment industry and the slumping shipping price of dry bulk cargos," reads the company's financial report.

COSCO lost 10.45 billion yuan in 2011 and is very likely to be listed as ST stock, or junk shares, if it reports losses for two consecutive years, according to the bourse rules.

COSCO's major business, dry bulk cargo shipment, has been influenced by the shrinking demands for raw materials amid the sluggish global economy, Zhang Lei, a macroeconomic analyst at Minsheng Securities, told the Global Times Wednesday.

Zhang said that the macroeconomy will remain dissatisfactory, making it hard to see how COSCO could improve in the fourth quarter.

In the third quarter, the company's freight volume of dry bulk cargo reached 56.1 million tons, a 16.2 percent fall from the same period last year, while its container shipping volumes increased 13.4 percent year-on-year.

Unlike bulk cargo shipping, the container shipping business was impacted only slightly by shrinking demand, thanks to a container shipping group established and operated in China by ship suppliers which assures its members little influence from the market, Zhou Liwei, an expert at the China Classification Society, told the Global Times Wednesday.

COSCO's long-term deficiency is also an aftermath of its heavy investment in building freight capacity between 2007 and 2008, Zhou said. "This expansion gave the company big liabilities as the global shipping market went slack."

The company, which runs 220 vessels, also signed rental contacts in 2008 with bulk cargo vessel suppliers for 117 additional vessels.

Zhou noted that most of COSCO's 3-5-year contracts expired in the end of this year or the beginning of next year, which may diminish the influence of the company's bulk cargo freight overcapacity in the first half of 2013.

Unlike COSCO, another major Chinese shipping company CSCL was able to turn around its net loss of 1.28 billion yuan in the first half to gain profits worth 990 million yuan in the third quarter, according to its third-quarter financial report also posted Wednesday.

CSCL has been more willing than COSCO to initiate strategic cooperation with both shipbuilders and renters, allowing them to keep their prices steady, an industry analyst told the Global Times on condition of anonymity.