China COSCO invested heavily to build its shipping capacity in 2008, when international freight rates were at record highs. But as the economy further slows and the demand shrinks, the huge shipping capacity has become a big liability.
Currently, nearly half of China COSCO's bulk cargo vessels are rented from other shipping companies. Zhang Yongfeng, an expert at the Shanghai International Shipping Institute, told the Global Times that the rent for a vessel in 2008 was almost eight times the current rent, and the rent contract usually lasts three to five years.
In the second quarter of this year, China COSCO's losses were a bit smaller than the previous quarter's losses of 2.7 billion yuan, given a slight upturn in container shipping rates, the company said in the statement.
However, experts noted that the second half will still be tough for the sector, and China COSCO is very likely to report losses for a second consecutive year.
According to rules of the Shanghai Stock Exchange, if a company reports losses for two straight years, its shares will be listed as ST (special treatment) stock or junk shares. If the company continues to incur losses for a third consecutive year, it would face the risk of delisting from the bourse.
China COSCO's Shanghai-listed shares tumbled 1.24 percent to 3.98 yuan following its announcement of first half results, and its shares on the Hong Kong bourse dropped 3.49 percent to HK$3.04.
Landmark building demolished in Chongqing, SW China
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