COSCO, China Shipping report first half profits amid merger rumors, stock freeze

“In second half of 2015, international trade still won’t be cheerful,” CSCL said in its most recent financial statements, pointing to the massive influx of new capacity in the ocean liner industry.    China’s two big container shipping companies, reportedly engaged in merger talks for the past three weeks, have reported their results for the first half of 2015.
   China COSCO Holding Ltd., parent of COSCO Container Lines, and China Shipping Container Lines (CSCL) said the suspension in trading of their shares, which began August 10, continues, but they have not provided information on their plans or the scope of their discussions.
   COSCO and CSCL are ranked as having the 6th and 7th largest deployed containership fleets in the world, according to ocean carrier schedule and capacity database BlueWater Reporting. A merger would lift them into 4th place, behind Maersk, MSC, and CMA CGM, and just ahead of Evergreen and Hapag-Lloyd.

COSCO.   COSCO reported a profit of 2.55 billion Chinese yuan renminbi ($401 million) for the six months ending June 30, 2015 compared with a loss of 1.67 billion RMB in the first half of 2014.
   COSCO revenues fell to 29.9 billion RMB in the first half of this year compared with 32.5 billion RMB in the first half of last year.
   In the first half of 2015, container shipping accounted for about 23.27 billion RMB of revenues; dry bulk shipping about 3.85 billion RMB; container terminal operations about 1.39 billion RMB; and container leasing about 437 million RMB.
   The container shipping business reported profits of 1.6 billion RMB in the first half, a sharp turnaround from the 869 million RMB loss in the business in the first half of 2014. The company moved 4,793,946 TEUs in the first six months of this year, 6.8 percent more than in the same period of 2014.
   COSCO said of the first half results, “the global economic growth slowed down, the overall demand in the shipping market weakened, the oversupply in shipping capacity continued, the imbalance between supply and demand in the international shipping market was not substantially improved, and the freight rates in the shipping market showed a downward trend.
   “The China Containerized Freight Composite Index (CCFI) averaged at 970 points in the first half of the year, down 12 percent as compared with 1,102 points last year. The Baltic Dry Bulk Freight Rate Index (BDI) averaged at 623 points in the first half of the year, down 47 percent as compared to the same period last year, hitting its lowest level since the financial crisis.
   “Although the decline in the international oil price helped to improve the operating conditions, the shipping companies were still subject to tremendous operating pressure due to depressed freight rate in the shipping market,” the ocean carrier added.
   COSCO said it expects container traffic to grow just 4 percent in the second half of this year, compared with 3.7 percent in the first half of 2015 and 5.5 percent for all of 2014, citing a forecast by the London consultants Drewry. This comes as container carrying capacity is expected to grow 8.8 percent in 2015 compared to 6.3 percent in 2014, according to a forecast by Alphaliner.
   “It’s expected that the situation of slow growth in the demand, continued oversupply of shipping capacity and competition among alliances in the container shipping industry is hard to change in the near future,” said COSCO.
   A member of the CKYHE Alliance along with “K” Line, Yang Ming, Hanjin and Evergreen Line, COSCO said it will seek to “optimize route layout and fleet structure, enhance alliance cooperation and efficiency, and globally expand the alliance route network and comprehensively improve the competitiveness of product.”

China Shipping Container Lines.   CSCL had profits of 19.1 million RMB in the first half of 2015 compared with 406 million RMB in the first half of 2014, according to the company’s most recent financial statements. Revenues were 15.99 billion RMB in the first half of 2015 compared with 17.41 billion RMB in the first half of 2014.
   CSCL moved 3.99 million TEUs in the first half of the year, a 1 percent increase compared to the first half of 2014. Its volumes were down globally with the exception of the Asia-Pacific trade lanes, where volume rose 12.2 percent to 1,045,293 TEUs.
   “In second half of 2015, international trade still won’t be cheerful. With the massive influx of new shipping capacity, shipping market will face even more uncertainties,” said CSCL, which is a member of a different alliance, Ocean3, whose other members are CMA CGM and United Arab Shipping Co.
   “The shipping industry is gradually developing towards scale expansion, intensive operation and supply chain integration. Thresholds of market entry and service standards will continues to rise along with the increasing scale of container liners, innovations in large vessel operations and in service concepts,” said CSCL. “In response to the ever changing shipping market, the company will actively adjust its strategic thinking and endeavor to create its service advantage, cost advantage and competitive edge, to become bigger and stronger.”
   China Shipping said in the first half of 2015 it enhanced strategic cooperation with China Railway Corp., with the loaded container volumes of railway transportation increasing 60 percent.