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COSCO Shipping leans on new U.S. trade partners for growth

COSCO Shipping Holdings (HKEX: 1919) said it saw “relatively good results” in the first half 2019 despite a macroeconomic environment that seems all but intent on slowing world trade. But China’s biggest shipowner is increasingly tapping non-Chinese markets for its growth.    

The third largest containership company by capacity, COSCO Shipping reported first-half revenue of $10.1 billion, up 53 percent from the year-earlier period. Net profit of $205.8 million for the period was up from a loss of $35.4 million. 

The ongoing U.S.-China trade war, the imposition of new tariffs on Chinese made goods, and Europe’s economic slowdown pushed demand for container shipping down to 2 percent in the first half of 2019. COSCO Shipping said the economy and trade “faced relatively severe challenges and increased uncertainties, and the growth in demand for container shipping was slowing down” during the period. 

But a low number of newbuild vessels delivered into the market as well as increased scrapping of older ships kept the market mostly balanced.

The outlook for the remainder of 2019 is more of the same. It said demand in container shipping market will maintain a slow growth. But capacity will adjust lower thanks to the scrapping of older, less efficient vessels due to the impact of the International Maritime Organization’s low-sulfur fuel rules coming in 2020. 

While U.S.-China trade levels tumble, ‘China’s total trade volume with the countries along the “Belt and Road” is expected to continue to grow rapidly,” it said.

Thanks to its acquisition of Orient Overseas Container Lines and the resulting synergies, COSCO “achieved relatively good results.” OOCL itself posted a $139 million profit for the first half.

Excluding OOCL results, COSCO reported revenue rising 4 percent to $6.9 billion with profit of $93 million. Profit was $93 million during the period. 

COSCO Shipping reported a fleet of 493 vessels, with the total shipping capacity of 2.9 million TEUs, a 5 percent increase as compared to the end of 2018.

COSCO Shipping, a member of the OCEAN Alliance along with CMA CGM and Evergreen Marine, said it is taking an active part in China’s “Belt and Road” through expanded services in developed and emerging markets.

During the period, OCEAN Alliance launched its “DAY3” services, covering 40 routes and offering 594 port pairs services with a total shipping capacity of 325 vessels and 3.82 million TEUs. 

It took delivery of eight container vessels accounting 144,000 TEUs in new capacity during the first half. The ships are serving Northwest Europe, U.S. East Coast and the Middle East routes.

COSCO Shipping also called out feeder service of smaller container ships for intra-regional markets.

Overall volumes during the quarter reached 12.4 million twenty-foot equivalent units (TEUs), up 40 percent from a year ago and inclusive of OOCL. COSCO alone saw volume of 9.1 million TEUs, up 2 percent from a year ago. 

In the first half of the year, COSCO Shipping said it optimized its Far East-to-east coast of South America routes and Europe-to-west coast of South America routes. OOCL expanded its coverage of the emerging markets by adding new routes between Middle East/India Subcontinent and North Europe, and Asia to Latin America. 

It said OOCL is using COSCO Shipping slots in Africa and South America routes, allowing OOCL to add cover seven countries in Africa and nine Far East-to-Africa routes, along with eight countries in South America and three Far East-to-South America routes.

COSCO Shipping also said the transfer of ship operation rights on the trans-Atlantic route was completed. OOCL operated all vessels on the trans-Atlantic routes under the dual brands, and COSCO SHIPPING Lines continued to offer the Atlantic route service products by purchasing slots on vessels of OOCL.

COSCO Shipping and OOCL also boosted its intra-Asia service by raising the number of service routes to 42 in Southeast Asia, “which effectively captured the growth opportunities of cargo transportation in Southeast Asia,” it said. 

The two liner companies also optimized the Middle East regional routes centered on the Abu Dhabi hub port, and enhanced European intra-regional routes, with three new routes withZeebrugge as port of call added in the first half of the year. Currently, 27 intra-European routes have been put into operation in Europe. COSCO Shipping noted that the percentage of shipping capacity deployed by itself and OOCL in emerging markets and intra-regional markets has increased to 16 percent and 36 percent, respectively. 

Due to new shifts in cargo flow brought on by the China-U.S. trade war, COSCO Shipping expanded capacity of Southeast Asia to the United States. COSCO Shipping’s volume of non-China routes increased by 7.8 percent, it said, accounting for just over one-third of their total foreign trade cargo volume. 

As a result of offering direct service from Southeast Asia, COSCO Shipping said the proportion of trans-shipment cargoes gradually decreased, with significant improvement in trans-shipment efficiencies.

The company note that volumes going through its COSCO Shipping Ports subsidiary is also growing. COSCO and OOCL’s volume at Greece’s Piraeus Container Terminal increased by 26 percent and 18.9 percent respectively compared with the same period last year.

 COSCO and OOCL also pushed through more boxes at its Valencia, terminal in Spain, increasing throughput by 39.5 percent and 23.1 percent respectively. 

COSCO’s reach into Europe is also being helped with its block train intermodal service from Piraeus. The service saw shipping volume of 37,000 TEUs, up 28 percent from a year earlier. Likewise it added 20 new China-Europe railway container liner service routes in the first half of the year, totaling 25 routes at present.

 In the first half of the year, COSCO Shipping completed 211 trips in China-Europe railway services and a total cargo volume of 16,000 TEUs, about 10 times that of the same period last year. 

In the first half of the year, the Company also recorded a total volume of 530,000 TEUs in railway services for China domestic and foreign trade, representing an increase of 8 percent as compared to the same period of last year. 

COSCO Shipping said its online quotation and booking service for ocean freight continues to grow. The volume delivered on the e-commerce platform in domestic routes reached 260,000 TEUs in the first half of the year, with a total transaction amount of $79.5 million, representing an increase of 4 percent as compared to the same period of last year.

Michael Angell, Bulk and Intermodal Editor

Michael Angell covers maritime, intermodal and related topics for FreightWaves. His interest in transportation stretches back several generations. One great-grandfather was a dray horseman along the New York waterfront and another was a railway engineer in Texas. More recently, Michael has written about the shipping industry for TradeWinds, energy markets for Oil Price Information Service, and general business topics for FactSet Mergerstat and Investor's Business Daily. When he is not stuck in the office, he enjoys tours of ports, terminals, and railyards.

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