China Cosco Surges on Container Outlook: Hong Kong Mover
Stock Chart for China Shipping Container Lines Co Ltd (2866)
China Cosco Holdings Co. (1919) jumped the most in more than two months in Hong Kong trading after predicting an end to a container-rates slump that contributed to it losing 10.5 billion yuan ($1.7 billion) last year.
The company, the operator of Asia’s largest container line, jumped 8.4 percent, the most since Jan. 17, to close at HK$4.91. China Shipping Container Lines Co. climbed 6.4 percent and Orient Overseas (International) Ltd. rose 2.6 percent.
‘We should have reasonable rates coming back,’’ Chairman and Chief Executive Officer Wei Jiafu told reporters in Hong Kong today via video-link. “Shippers, shipping companies and ports have reached a consensus that no party in the chain should collapse.”
The company, based in Tianjin, China, was largely successful in pushing through a rates increase on Asia-Europe routes this month, said Executive Vice President Wan Min, as lines pare overcapacity that contributed to price wars last year. AP Moeller-Maersk A/S (MAERSKB), the world’s largest container line, has said it will cut Asia-Europe capacity 9 percent this year.
“Industry fundamentals are rapidly improving,” Credit Suisse AG analysts Davin Wu and Timothy Ross said in a note to clients today, as they reiterated an outperform rating on the stock.
The analysts also predicted that Cosco’s container-shipping unit will break even in the second quarter. The operations lost 6.4 billion yuan in the whole last year, while average rates fell 20 percent, based on a Hong Kong stock exchange statement yesterday.
China Cosco’s dry-bulk vessels also had a 5.4 billion yuan loss last year as expansion in the global fleet outpaced China’s demand for coal and iron-ore shipments. The company has merged units to pare costs and begun targeting new markets to revive the business.
The dry-bulk market will “remain weak” this year, said President Jiang Lijun. “The second half may be better than the first.”
The Baltic Dry Index (BDIY), a benchmark for commodity-shipping rates, has dropped 40 percent in the past year. China Cosco had a fleet of 374 dry bulk ships as of Dec. 31, compared with 450 a year earlier.
The company’s container-shipping sales dropped 11 percent to 41.4 billion yuan last year, even as volumes rose 11 percent to 6.9 million boxes. Average rates on Asia-Europe routes tumbled 33 percent, while trans-Pacific fees dropped 16 percent, based on Bloomberg calculations.
The price of 380 Centistoke Bunker Fuel, used by ships, also averaged 40 percent higher last year than a year earlier in Singapore trading, according to data compiled by Bloomberg.
The company had 157 container ships at the end of 2011. The combined capacity was 667,970 boxes, an 8.8 percent increase from a year earlier. The shipping line is due to receive 10 owned vessels able to carry 4,250 boxes each this year, along with four leased 13,000-container vessels.
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