Friday, August 26, 2011

Container Shipping Giant Blames Poor Results On Freight Rate Fall

Fuel Costs Contribute to Six Month Drop
Shipping News Feature

CHINA – The owners of the country’s leading shipping conglomerate and container freight carrier has posted first half results this week and has done worse than expected, despite a struggle to renegotiate contract rates with owners whose vessels it has under charter over recent weeks.

COSCO Holdings claims to have the largest dry bulk freight fleet in the world plus a total container carrying capacity within the group of 430,000 TEU and yet has recorded a reported loss of around $430 million for the first six months trading this year blaming escalating bunker prices and declining freight rates. Meanwhile many in the industry have taken a dim view of the Hong Kong registered group struggling to escape from its financial commitments to suppliers as a bear market has set in on the bulk and container sectors due mainly to oversupply and a slowdown in some sectors.

With pressure on all ship owners as more new build vessels come on stream none of the companies from which COSCO has ships under contract are likely to want to reduce agreed rates. The condition of the Baltic Dry Index has been well documented and for the COSCO group the problems are exacerbated by the sheer volume of TEU availability as the huge new ships ordered by many of the major box carriers during the pre 2009 halcyon days, come off the blocks.

Reuters reported yesterday that the group intended to launch a US dollar bond for up to $2 million through its offshore wholly owned subsidiary and quoted a company statement that the second half of this year was likely to be ‘complex and ever changing’.