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August 29, 2009

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COSCO's loss may see orders canceled

CHINA COSCO Holdings, the country's largest shipping group, plans to cancel orders for container vessels and delay delivery of new ships after it sailed into a loss in the first half of this year.

The shipper lost 4.59 billion yuan (US$672 million), or 0.45 yuan per share, in the first six months, compared with a net profit of 15.12 billion yuan in the same period a year ago, it said in a statement to the Shanghai Stock Exchange.

COSCO delivered 2.35 million TEUs (20-foot equivalent units) during January and June, a slump of 21.9 percent from a year earlier, while its shipping capacity jumped 20.9 percent to 554,000 TEUs.

Its dry bulk shipping business reached 129.3 million tons, a loss of 4.8 percent from a year earlier, while the capacity of its dry bulk cargo vessels rose 1 percent to 33.92 million tons, according to the statement.

"Our group will continue to control the growth of our shipping capacity by canceling or postponing some shipbuilding orders, terminating vessel charters earlier, chartering out vessels and disposing vessels that are obsolete to deal with the challenging environment," it said.

The dismal global economy in the first half of this year led to a dramatic decline in trade demand from major economies and eroded freight rates charged by shipping carriers.

"China COSCO's performance will improve in the third quarter of this year on rising rates of TEUs and the recovering Baltic Dry Index," China International Capital Co said in a note.

COSCO forecast the global economy to recover during the rest of this year, and demand for major types of dry bulk cargoes usually rises in the fourth quarter which is the traditional peak season.

The shipper also plans to spend 2 billion yuan to acquire the remaining 49 percent stake in its COSCO Logistics unit.


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