COSCO Shipping Co, the specialized vessel arm of China's largest shipping group, cruised to a 49-percent jump in first-half earnings on the back of higher freight rates.
Its net profit rose to 354.67 million yuan (US$46.8 million) in the first six months of the year. Sales advanced 35 percent to 2.45 billion yuan, the company said in a Shanghai Stock Exchange filing yesterday.
The Baltic Dry Index, a benchmark measure of rentals of dry bulk vessels, hit 6,278 points at the end of June, jumping from 4,400 seen in the start of the year. The index averaged 5,772 points in the first half of the year, a whopping jump of 113 percent from the same period a year earlier, COSCO Shipping, controlled by China Ocean Shipping (Group) Co, said.
During the reporting period, sales from carrying exports rose 49.6 percent to 1.18 billion yuan while sales from inbound shipments added 12.9 percent to 406 million yuan, the Guangzhou, Guangdong Province-based firm said. The shipper earned the balance from shipments along China's coast and in third countries.
Lower oil prices in the first half also helped ease its operating costs. Fuel accounted for 29.5 percent of the company's operating costs in the first half, down 3.2 percentage points year on year. But the firm warned oil prices could rise in the second half.
"COSCO Shipping is like a monopoly in the specialized equipment carrier industry," said a shipping analyst at TX Investment Consulting Co. "China's rising machinery exports and the fact of inadequate vessels could well sustain the freight costs."
COSCO Shipping had 85 ships in its fleet as of the end of June, with a total capacity of 1.38 million deadweight tons. It plans to sell bonds to expand the fleet. Ten more ships will be added to its fleet after 2009, which would boost its shipping capacity by 23 percent, the TX analyst said.
Shares in COSCO Shipping have been suspended from trading since last Tuesday pending the bond sale. They have more than doubled this year and were last quoted at 28.29 yuan last Monday.