Cosco Shipping Holdings, the Hong Kong-listed arm of China Cosco Shipping, said Friday it would continue to increase its capacity and reach its “peak of growth” in 2018 and 2019, after booking a hefty net loss of 9.9 billion yuan ($1.44 billion) last year.
The world’s fourth largest container shipping line, state-owned Cosco was created after the $8.7 billion merger of two shipping companies last year. With a fleet of 312 vessels and capacity of 1.68 million 20-foot equivalent units (TEUs), it aims to boost its capacity 28% to 2.15 million TEUs by 2019.
Cosco said new shipping routes to Africa and Latin America and regional routes in Southeast Asia will be the major source of capacity growth. It expects emerging markets to account for 15% of its capacity this year, up from 8-10% last year. It expects the U.S. and Europe to account for half of its capacity, though growth is lagging in these markets.
At a briefing on Friday, Cosco Vice Chairman Huang Xiaowen said, “2017 has been better than last year,” referring to an industry recovery. Despite concerns over looming U.S.-China trade frictions, Huang said: “There were way too many ‘black swan’ events last year, but it has not been as worrying as one would imagine since we entered the first quarter.”
In January and February, the group reported a net profit before interests and tax of 490 million yuan, helped by a 70% surge in cargo volume and a 10.6% increase in unit income for its container shipping business. The total throughput for its container terminal business rose 6.4% on the year.
Huang said Hanjin’s bankruptcy and its aftermath — with $14 billion worth of goods stranded at sea — has prompted “a flight to quality” and cargo owners to turn to shipping lines deemed financially credible.
“It’s been a lot smoother when we touch base with our clients. … This, we believe, is going to raise our pricing power over new contracts this year,” he said, suggesting “double-digit growth” in freight rates for its U.S. and European routes could happen due to a lower base a year ago.
Huang’s upbeat tone came as a contrast to the group’s disappointing results last year. Cosco slipped into the red from a net profit of 469.3 million yuan in 2015, after it sold its dry bulk shipping and container leasing businesses and some vessels at a loss amid a restructuring.
Last year, Cosco took over vessels from a unit of China Shipping Group on leased terms as part of a government-approved reorganization to overhaul the industry, which had been hit by a supply glut. Its revenue rose 27% to 69.83 billion yuan on the back of expanded capacity that boosted its container shipping volume by 54% on the year. Revenue from its terminal business rose 8%.
