China Cosco Slumps to Loss on Falling Dry-Bulk, Container Rates

China Cosco Holdings Co., Asia’s largest shipping line by market value, reported a first-quarter loss after global overcapacity caused a decline in rates for carrying commodities and containers.

The net loss was 503 million yuan ($77 million), the Tianjin, China-based company said in a statement today, citing domestic accounting standards. It didn’t give a year-earlier figure. Sales dropped 5.6 percent to 16.4 billion yuan.

Nippon Yusen K.K. and Mitsui O.S.K. Lines Ltd., Japan’s two biggest shipping lines, today forecast declines in annual profit, as expansion in the global fleet outpaces demand. China Cosco’s first-quarter container rates dropped from a year earlier and dry-bulk fees have tumbled 62 percent in a year, according to the Baltic Dry Index.

“There are too many ships and too much capacity,” said Johnson Leung, head of regional transport at Jefferies Group Inc. in Hong Kong. “The first quarter was tough, but investors need to be prepared because the second quarter will be even worse.”

The price of 380 Centistoke marine bunker fuel, used by ships, jumped 29 percent in Singapore trading in the first quarter to $654 per metric ton, the biggest gain since the second quarter of 2009. It closed at $685.50 today.

Container Rates

First-quarter sales at China Cosco’s container-shipping unit, the nation’s largest, rose 3.8 percent to 7.9 billion yuan, trailing a 12 percent jump in volumes. Its dry-bulk fleet had a 2.2 percent drop in volumes to 65 million tons, according to the statement. It didn’t give a revenue figure.

China Cosco said last month it expects a 32 percent drop in dry-bulk traffic this year to 959 billion ton-nautical miles. It operated 438 commodity vessels and 153 container ships as of March 31.

The company dropped 0.7 percent to close at HK$7.70 in Hong Kong trading before the earnings announcement. It has fallen 6.6 percent this year, compared with a 3.3 percent rise for the Hang Seng Index.

Spot market container rates on Asia-Europe routes have fallen below break-even levels because of rising capacity, according to Alaphaliner. Global container-ship deliveries will likely hit a record this month, with shipyards handing over vessels with a combined capacity of about 226,500 boxes, according to the shipping-data provider.

Cosco, A.P. Moeller-Maersk A/S, the world’s largest container line, and other shipping companies are seeking to boost rates for Asia-U.S. West Coast shipments by $400 per 40-foot container as they negotiate annual contracts generally starting around May 1.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE