Asia’s biggest shipping firm, China Cosco Holdings, suffered the biggest interim net loss of a mainland-listed company ever despite a stabilizing global shipping market.
The Hong Kong-listed shipping giant, formerly known as China Ocean Shipping Co. (Cosco), reported a net loss of 7.2 billion yuan (US$1.1 billion) for the first six months of 2016, compared to profits of 1.97 billion yuan in the same period one year ago.
The state-owned company blamed the loss on lower demand for container shipping services and one-time charges related to the February merger between Cosco and China Shipping Group. Of the total deficit, 2.4 billion yuan were related to sales of subsidiaries—at a loss—in connection with the consolidation.
The massive six-month loss is the biggest of any listed Chinese company since A-shares were introduced in 1990.
Industry-Wide Slump
The entire dry bulk shipping industry had been mired in a years-long slump.
The dry bulk market has been experiencing disequilibrium between supply and demand. Expecting continued emerging markets growth—especially from China—a large number of ships were ordered prior to the 2008 global financial crisis.
Due to the high backlog and slow shipbuilding process, by the time the ships were finally delivered into service years later, the Chinese economy had slowed considerably and its demand for iron ore, coal, and lumber waned. The excessive supply of ship capacity and lower imports from China drove down the price and volume of global shipping.
Market Rebalancing
In recent months, the dry bulk market has rebounded somewhat and while experts offer divergent views, the consensus is that the market has been stabilizing on a convergence of supply and demand.
