Cosco Shipping Holdings, part of state conglomerate China Cosco Shipping, has said it would adjust sailings and maintain its “dual-brand” strategy during the coronavirus pandemic.
The container shipping and port firm has enjoyed strong financial performances after completing the acquisition of OOCL’s parent Orient Overseas (International) Ltd (OOIL) last year.
However, Cosco Holdings warned of business risks associated the Covid-19 outbreak in its annual report and said counter measures are required.
“As the virus spreads across the globe, global and Chinese economies are facing Signiant headwinds. The shipping and logistics industry…will directly face the challenges on multiple fronts,” Cosco Holdings said.
“The US-China trade tension, coupled with the pandemic, will accelerate the restructuring of global supply chain.”
“The imports and exports of manufactured goods in China will continue to be affected and shipping demand may be transferred to other regions," the company said.
“Overall shipping demand is falling in the short run. For the medium and long term…China’s domestic demand and foreign trade are to decrease further and Chinese box throughput may decline.”
Negative impact
According to shipbroker Clarkson, global box trade is projected decline by 5% in teu-miles in 2020.
In the week to 27 March, Sea-Intelligence estimates that liner operators cancelled 45 sailings.
Alphaliner said India-related trades had also been affected by cancellations, including three sailings jointly operated by Hapag-Lloyd, Cosco, Yang Ming and ONE where vessels of 5,500-teu to 7,300-teu were deployed.
Faced with the Covid-19 pandemic, Shanghai and Hong Kong-listed Cosco Holdings said it would adjust sailings, shipping capacity and port operations while constantly reviewing the business environment.
“We will assess the market conditions region-by-region and seek to avoid business risks in the short run,” the company said.
“We will get ahead in the game and seek triangulation opportunities to manage the market risks.”
Strong 2019 results
Riding on the OOIL merger, net profits of Cosco Holdings increased to CNY 6.76bn ($95.2m) in 2019 from CNY 1.23bn in 2018, in line with earlier forecasts. Revenues rose to CNY 151bn from CNY 121bn.
Its container shipping business recorded revenues of CNY 145bn in 2019, up 26.1% from the previous year. Revenues of its port unit rose by 13.5% to CNY 8.75bn.
In January, Andy Tung stepped down as OOIL’s co-CEO, signalling the gradual exit of the founding Tung family.
But Cosco Holdings said it will continue to operate its box shipping business based on a “dual-brand strategy”. Its shipping capacity is controlled by two subsidiaries, Cosco Shipping Lines and OOCL.
“We will maintain our dual-brand strategy and seek highly efficient coordination, so the two brands can benefit each other in global operations,” the company said.
“With the economies of scale we have now, we can build a better service network based on requirements of clients.”
