The ocean carrier reported a net loss of 7.21 billion yuan renminbi in the first six months of the year compared with a 1.97 billion yuan renminbi profit in the same 2015 period amid its merger with fellow state-run line China Shipping.
China COSCO Holdings Co. reported a net loss of 7.21 billion yuan renminbi (U.S. $1.1 billion, based on today’s exchange rate) in the first half of 2016 compared with a 1.97 billion yuan renminbi profit in the same 2015 period, according to the company’s most recent financial statements to the Shanghai Stock Exchange.
The Chinese shipping conglomerate is in the midst of a merger with fellow state-run line China Shipping that will make it the fourth largest container carrier worldwide and the biggest in Asia by far.
Following the merger, the China COSCO Holdings unit handles container shipping and port terminal operations, while bulk shipping operations have been transferred to parent China COSCO Shipping.
Revenues for the first six months of the year at China COSCO Holdings fell 8.5 percent to 30.9 billion yuan renminbi compared with the previous year.
The company attributed the loss primarily to transaction costs related to the disposal of COSCO Bulk and Florens Container Holdings Ltd. of 2.4 billion yuan renminbi, as well as a lack of government subsidies for vessel demolition during the period. Those subsidies totaled 3.9 billion yuan renminbi in the first half of 2015.
The revenues decline came despite a recent report from London-based maritime consultant Drewry that indicated global container volumes on major trades grew 2.6 percent year-over-year during the six months of 2016.
Container carrier losses have been mounting throughout the beginning of 2016 due to tepid trade volumes and persistent overcapacity, which have put continual downward pressure on rates.
Industry leader Maersk Line, for example, reported a second quarter net operating loss after tax of $151 million compared with a $507 million profit in the second quarter of 2015 as revenues tumbled 19 percent to $5.06 billion. This prompted the carrier’s parent, Danish conglomerate A.P. Moeller-Maersk A/S, to engage in a strategic review that could result in a corporate restructuring and even splitting into two separate companies.
According to SeaIntelligence Consulting CEO Lars Jensen, barring substantial changes to the container shipping market, carrier losses will continue to pile up this year. With 13 of the top 20 container lines by volume already reporting a combined $2.5 billion in net losses in the first half of 2016, Jensen estimates container carriers could lose a combined $8 billion to $10 billion for the full year.
COSCO posts $1.1b loss in first half 2016
