Chinese carrier says result was hard won and partly attributable to its terminal business.
COSCO Shipping Holdings said Thursday that it had eked out a profit attributable to equity holders of the company of 40.8 million Chinese yuan renminbi (RMB) or approximately $6 million in the first six months of this year compared with a profit of 1.86 billion RMB in the same period last year, a 98 percent drop.
The decline in profit came despite an increase in revenue to about 45 billion RMB in the first half of this year compared to 43.5 RMB in the first half of 2017.
COSCO called the profit a “hard-won” result and attributed it to an operating performance of its container shipping business “which was better than the industry average and the profit contribution of the terminal business.”
The company’s terminal business handled 2.8 million TEUs in the first half of 2018, 35 percent more than in first half of 2017. Revenue from the terminal business was up 67.5 percent to 3.18 billion RMB, while revenue from container shipping was up just 1.3 percent to 42.4 billion RMB.
The company noted that in the first half of the year, demand for container transportation grew moderately and global cargo volume increased by 6.2 percent as compared to the same period of last year. COSCO itself achieved a shipping volume of 11,235,000 TEUs, representing an increase of 12.4 percent as compared to the same period of last year.
“However, due to the concentrated delivery of large container vessels during the same period, the growth in global capacity exceeded the growth in demand, which put downward pressure on the market price. In the first half of the year, the average of the China Containerized Freight Index (CCFI) was 797 points, representing a decrease of 3.8 percent as compared to the same period of last year, while the average CCFI for the second quarter recorded a decrease of 4.6 percent as compared to the first quarter of this year.”
The CCFI is based on contract rates. Like the more widely publicized Shanghai Containerized Freight Index, which is based on spot rates, it is produced by the Shanghai Shipping Exchange.
“Meanwhile, surging bunker prices resulted in the increase of the cost of liner companies,” said COSCO.
Looking forward to the second half of 2018, COSCO predicted the “world economy will remain on the path of recovery. Although trade protectionism is on the rise and Sino-US trade frictions
may inhibit the growth of the global economy to a certain extent, it is expected that
the global economy will continue its growth since 2017, thus providing guarantee for
the growth of container shipping volume.”
COSCO noted its acquisition of the parent company of Orient Overseas Container Line was completed at the end of the July and said COSCO “will soon open a new chapter of developing ‘dual brands.’ “
The front desk sales and customer service systems of COSCO and OOCL “will remain unchanged
to ensure the continuity of customer services; while middle and back desk functions such as cost control will be gradually optimized to improve operation efficiency and service standards, which is expected to result in obvious synergies in areas such asroute networks, information systems, container fleets and supplier procurement,” the company said.
At the end of June, COSCO said its container fleet reached 393 vessels with carrying capacity of 2.04 million TEUs, 15.8 percent more than a year earlier. With the acquisition of OOCL and new ships on order, COSCOs capacity now exceeds 3 million TEUs, which it says now makes it the third largest in the world, ahead of CMA CGM, and behind only Maersk and MSC.
Most of its new capacity was put in emerging markets, which it says
had growth of 27 percent, “which was significantly higher than the
routes in Europe and America.
COSCO and OOCL is a member of the Ocean Alliance along with CMA CGM and Evergreen.
The company noted that 60 percent of its capacity is along routes that are part of China’s “Belt and Road” initiative that aims to connect China with trading partners in Asia, Europe and Africa.
COSCO: Slim profit for first half
