State giant China Cosco Shipping’s energy and container shipping arms, both of them dual-listed in Shanghai and Hong Kong, fared very differently in the first quarter when the coronavirus pandemic started to affect their results.
While Cosco Shipping Energy Transportation (CSET) managed to ride on strong tanker earnings, Cosco Shipping Holdings suffered from lower shipping volumes.
CSET said its first-quarter profit amounted to CNY 629m ($88.9m) between January and March, up 46.9% from the same period of 2019. Revenues rose 5.7% to CNY 4.07bn.
“The global oil shipping market was on an upward trend in the reported period amid strong volatility,” the company said in a quarterly report.
“Demand for floating storage significantly increased due to wide oil contango, with the coronavirus pandemic leading to a fall of 2.5m barrels per day in the world’s oil consumption and an oil price war that began in early March.”
Strong VLCC rates
Freight rates were at elevated levels in the first quarter due to strong demand for tankers, even though 13 newbuilding VLCCs were delivered and none scrapped, according to CSET.
The company, part of state giant China Cosco Shipping, was separately aided by its continued expansion of LNG fleet.
CSET’s LNG shipping business booked pre-tax profits of CNY 222m in the first quarter, up 61.4% from the same period of last year.
Earlier this week, the company announced its plan to form a joint venture with PetroChina to build another three LNG carriers at Hudong-Zhonghua Shipbuilding for $185m apiece.
Negative impact of sanctions
But CSET’s cash inflows from business operations decreased by 81.5% to CNY 279m due to earlier US sanctions on Cosco Shipping Tanker (Dalian).
Cosco Dalian, which owned 42 tankers, including 26 VLCCs, was on Washington’s sanctions list between 25 September and 31 January for allegedly transporting Iranian oil.
“The subsidiary’s shipping capacity was constrained by sanctions in January. And we have not received charter payments for some of its voyages that began in February,” CSET said.
The company recorded cash inflows from financing activities of CNY 5.51bn, compared with cash outflows of CNY 732m.
This was mainly because CSET completed its long-planned private placement in Shanghai, according to the company.
In March, CSET raised a total of CNY 5.1bn from its parent group and two subsidiaries of China State Shipbuilding Corp.
Box shipments fall
Cosco Holdings, which controls the world’s third largest container shipping fleet, saw net profits fall sharply to CNY 292m in the first quarter from CNY 687m in the same period of 2019.
This was despite a 3% gain in revenues to CNY 36.1bn amid continued fleet expansion.
According to the company, the weaker net results came as container shipping rates volumes decreased.
Cosco Holdings shipped 5.61m teu of containers in total, compared with 5.88m teu in the first quarter of 2019.
In China, where the Covid-19 outbreak began, shipping volumes dropped to 1.05m teu from 1.25m teu.
