Cosco:higher operating costs outweighted revenues from improved shipping rates

COSCO Holdings of China, the parent company of Cosco Container Lines and Cosco Pacific among other units, has blamed higher operating costs for the 8.4 per cent fall in first-half earnings, according to a Reuters report.

The state-owned company said earnings totalled CNY968.68 million (US$128 million) for the six-month period ended June 30 compared with CNY1.06 billion in 2006 H1.

Cosco Holdings, which has a 52 per cent stake in sea container leasing and port company Cosco Pacific Ltd, said higher operating costs outweighted revenues from improved shipping rates.

"Owing to the increasing shipping capacity and cost pressure from various aspects, the operating costs of the group's container shipping and related business recorded a substantial increase of 18.4 per cent," the company said in a statement quoted by Bloomberg.

The company's dip in earnings follows positive results from rival shipping firm, China Shipping Container Lines Co., which recently announced a 14-fold increase in H1 profit to CNY1.16 billion with improved shipping rates.

The report cited a Credit Suisse forecast that container-shipping rates may climb 2 per cent next year followed by a 5 per cent rise in 2009.

The Bloomberg report said that while the container shipping industry can look forward to "strong demand" in the second half, China Cosco cautioned that it faces "problems such as high oil prices and increases in inland transportation charges".