Cosco Singapore Explores Ways to Help Shipbuilding Business

  • Stock jumps 77 percent in the past six trading sessions
  • Company's Chinese parent is undergoing state-led restructuring

Cosco Corp. Singapore Ltd., the shipbuilding arm of China Ocean Shipping Group, is exploring options to support its business as a slump in commodities trading and oil prices leads to sluggish demand for new vessels. The stock surged.

Cosco Singapore’s subsidiary China Shipyard Group Co. is considering expanding its funding sources and optimizing its asset structure, the company said in a statement Wednesday, without providing further details.

The statement came in response to questions from the Singapore exchange as the stock rose for a sixth straight day. The shares jumped 16 percent to S$0.505 at the close of trade, the highest level since June.

The shipyard expects to report a “significant net loss” in the fourth quarter as a 39 percent decline in bulk shipping rates has hit demand for new ships and led some customers to cancel existing orders, Cosco Singapore said this month. Customers are asking shipbuilders to defer delivery of offshore drilling rigs amid a slump in oil prices, undermining their earnings.

The Singapore-based company didn’t respond to an e-mail seeking comments. An e-mail and a phone call to Cosco in Beijing weren’t answered.

Trading Halt

Shares of Cosco Singapore resumed trading Dec. 14 after being suspended for four months pending an announcement relating to asset reorganization at its Chinese state-controlled parent.

China’s State-owned Assets Supervision and Administration Commission announced approval Dec. 11 for the reorganization of China Ocean Shipping Group and China Shipping Group. The move is part of government efforts to shrink industries plagued by overcapacity while creating globally competitive businesses.

The government’s plan would create four listed entities, each focusing on one aspect of the shipping business: containers, financing, terminals, and oil and gas, according to China’s official Xinhua News Agency.

Cosco Singapore said in November that a client canceled an order for a bulk carrier, which was due to be delivered in the second quarter of 2016. The company also agreed to defer delivery of a drilling unit to Sevan Drilling Ltd. by six months to April 2016.

The Singapore company posted a loss of S$86.1 million ($61 million) in the first nine months of the year, compared with profit of S$34.1 million a year earlier. Sales dropped 16 percent to S$2.79 billion. Its cash and cash equivalents totaled S$1.5 billion at the end of September, falling from S$1.8 billion a year earlier.

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