China Cosco Holdings posted a first-half net loss of $432 million, compared with a net profit of $553 million a year earlier, and said reached agreements on bulk carrier charter disputes that led to ship arrests.
The Beijing-based company said its container shipping unit reported an operating loss of $156 million as revenue, excluding chartered vessels, fell 4.2 percent to $2.8 billion. Container volume rose 9.8 percent to 3.24 million 20-foot-equivalent container units.
Cosco said it expects overcapacity to continue to depress freight rates through 2011. The company said demand on Asia-Europe and trans-Pacific routes remains “uncertain,” but the outlook on secondary routes is more positive.
By the Numbers: Container Rate Benchmark
Cosco’s bulk shipping unit lost $487 million as excess capacity and weak rates caused volume to drop 2.6 percent and revenue to plunge 27 percent to $1.9 billion. The company, which this month has had chartered bulk carriers seized by owners in payment disputes, said it had reached agreements with shipowners covering 18 vessels.
“The disputes have been appropriately handled,” General Manager Zhang Liang told reporters in Hong Kong, without offering details.
At least three Cosco bulk carriers have been arrested by shipowners seeking overdue payments. Jeremy Penn, CEO of London’s Baltic Exchange, said this week that exchange members were concerned about the issue.
“We are concerned about it and the Baltic clearly takes the view that freight and hire payments must be made in a timely fashion in conformity with contractual contracts and any desire to renegotiate a contract should be independent of that,” Penn told Reuters.
Johnson Leung, head of regional transport at Jeffries Group in Hong Kong, was quoted by Bloomberg as saying he didn’t believe the charter disputes reflected a liquidity issue but that the company was likely “playing tough” to cut costs.