Cosco beting on new markets for smoother sailing

China Ocean Shipping (Group) Co (Cosco), the country's largest shipping conglomerate, will step up its financial and resource support to routes from China to Africa, South America and Southeast Asia in an effort to head off unexpected risks caused by flagging markets in Europe and the United States, its chairman said.

Ma Zehua, Cosco's chairman, said that since 2003, the company has put its best resources on trading routes between China, the US and Europe. With the global recession, a supply glut in the industry created big losses for the shipping giant over the past two years.

Robust global economic growth from 2003 to 2008 saw shipping companies worldwide investing in new ships and routes to developed ports. But demand cooled during the global financial crisis and ensuing fragile recovery.

Thus, "emerging markets such as Africa and South America have already become close complementary trade partners to China", Ma said.

The markets offer agricultural and natural resources such as corn, soybeans, crude oil, iron and copper ore and, in turn "are keen to gain industrial products from the world's second-largest economy", Ma said.

"Rising demand for a range of commodity goods and manufacturing products will help Cosco diversify our business, and we have seen lots of growth potential in China-Africa and China-South America trade," he added.

Ma made the remarks during an interview with China Daily at the 2013 World Shipping (China) Summit in Ningbo, Zhejiang province.

The shipping sector is important to the world's large developing economies, particularly China, South Africa, Argentina and Brazil - countries heavily dependent on importing and exporting raw materials and manufacturing goods to boost their economies.

For these countries, freight rates play a great role in total economic value, sometimes even greater than the value created by high-end products and services. They also weigh heavily on industries like shipbuilding, finance, trade, ports and logistics services

Hindered by slow infrastructure development, countries like Vietnam and Indonesia rely heavily on container and bulk vessels for exporting their low-end products and importing machinery from the global market. Ma acknowledged this situation, noting that it offers yet another opportunity for Cosco to enhance its service network with members of the Association of Southeast Asian Nations.

In the first three quarters of 2013, Cosco posted a net loss of 2 billion yuan ($328 million), which was still less than its 6.4 billion yuan loss during the same period last year, according to a filing to the Shanghai Stock Exchange.

The company has posted losses for two consecutive years and may be delisted from the stock exchange if it can't return to profit this year.

To that end, Cosco sold off its logistics business, stakes in a container shipyard and office properties so far this year.

Ma predicted that China's shipping market will gradually recover between 2014 and 2015, as the world economy exits the recession, and said that freight volumes for container as well as dry-bulk ships have seen solid fourth-quarter growth.

The Shanghai International Shipping Institute's latest index shows that the prosperity level of China's shipping industry in the third quarter rebounded by 15 points to 101.7 points, quarter-on-quarter. It is the first time that the index surpassed the 100-point neutral reading since the third quarter of 2011.

China, the second-largest trading nation after the United States, experienced surging annual container shipping demand for 89 million twenty-foot equivalent units last year, according to a report by Shanghai-based China Ports and Harbors Association in August.

In the meantime, the import volumes of iron ore and coal were 740 million metric tons and 290 million tons, respectively, and the import volume of crude oil exceeded 270 million tons in 2012.

More than 90 percent of the commodities and goods was handled by domestic and international shipping companies.

"The main pressure on Chinese shipping companies is how they handle the low freight rates, and optimize cargo capacity and vessel performance, and sales and service capability of shipowners, as well as whether they can seize finance opportunities to upgrade their fleets," said Michael Lund, deputy secretary-general of the Copenhagen-based Baltic and International Maritime Council.

Ma said Cosco's new shortcut shipping routes to Europe and North America via the Arctic Northeast Passage are yet another way to promote the company's advantages.