Shipping giant Cosco charts seas of red ink
Mainland shipping giant struggles to find a course back to profitability through a multitude of major problems in its core freight businesses
The torrent of red ink flowing from China Cosco Holdings' balance sheet may have eased in the third quarter with the help of government subsidies. But the problems facing the firm's core dry cargo and container line businesses look far from over, as a slump in demand, too much tonnage in the global merchant fleet, and high-priced charters continue to weigh on the company.
Overall, quarterly losses at China Cosco have been trimmed this year. From a 2.69 billion yuan (HK$3.32 billion) net loss between January and March, the firm posted a 1.53 billion yuan net loss in the third quarter, helped by a 490 million yuan increase to 808.28 million yuan in government subsidies.
While some of the improvement came from high freight rates at Cosco Container Lines, analysts do not expect the rebound to continue. Jon Windham, head of the Asian industrials sector at Barclays in Hong Kong, said a decline in Asia-to-Europe freight rates since June signalled a sequential decline in container profitability in the fourth quarter.
Pointing to the problems affecting China Cosco and other mainland operators, Winnie Guo, shipping analyst with CCB International Securities, said the third quarter did not live up to expectations as the container freight rate index declined 1 per cent quarter on quarter.
But the losses at China Cosco are only one part of the malaise affecting the mainland's largest shipping company.