Chinese tanker giant Cosco Shipping Energy Transportation (CSET) has warned investors of a major profit slump in 2021.
In a statement to the Hong Kong and Shanghai stock exchanges, it said it expects to report a loss attributable to the equity holders of the company of between RMB 4.93bn ($775m) and RMB 5.13bn ($806m) for the year ending December 2021.
That compares to a positive result of RMB 2.38bn in the same period in the previous year.
The company blamed the slump in profits on the depressed tanker market, which has seen a 101% year-on-year fall in VLCC time charter equivalent rates, from $48,697 per day to just $518 daily.
“The structural conflicts of supply and demand in shipping capacity also led to low international tanker freight rates,” the company said in a statement.
CSET earlier announced it is making provision for asset impairment of 94 of its 141 tanker fleet, amounting to RMB 4.96bn, after carrying out a valuation at the end of last year.
CSET said the impairment was due to the continued bleak outlook for tanker rates, and the costs of meeting upcoming environmental regulations.
It estimates around 106 of its fleet will have to undergo modifications to meet the International Maritime Organization’s Energy Efficiency Existing Ship Index and the Carbon Intensity Indicator regulations, which enter into force from 2023.
On top of that, in October last year the State Council of the People’s Republic of China issued the Action Plan for Peak Carbon Emissions by 2030, which requires shipping companies to move to low-carbon technology.
Negative range
Commenting on the reasons for the asset impairment, CSET said: “The average daily time charter equivalent level of the market entered the negative range for most of the time which significantly lowered the income expectation of the future tanker market.”
In addition, the IMO and other international institutions have officially issued the “carbon emission reduction requirement” in the form of a convention, and its schedule, quantitative standards and measures and guideline have been widely recognized”.
Before the valuation, CSET said its 141 tanker fleet was valued at RMB 38.1bn, and RMB 33.2bn after.
