State Aid Helps Float China Shipping Lines

By Brenda Goh

SHANGHAI, March 26 (Reuters) – China Cosco , operator of the nation’s largest dry bulk fleet, posted a 54 p.c rise in full-year revenue on Thursday, boosted by subsidies from Beijing amid a subdued market.

The flagship unit of state-owned conglomerate China Ocean Shipping Group mentioned web revenue rose to 362.5 million yuan ($58.37 million) for the yr ending December 2014, up from 235.5 million yuan within the earlier yr, on a 3.94 p.c rise in income.

“The state subsidies have buttressed their earnings,” mentioned BOCOM International analyst Geoffrey Cheng. “Without them they would have made a loss.”

China Cosco mentioned it could have made a lack of 1.38 billion yuan with out elements such because the subsidies and cash raised from a share sale. “With the market still remaining subdued, the outlook for the shipping market in 2015 is not optimistic,” it mentioned in its assertion.

As China’s financial slowdown squeezes the worldwide transport business, the nation’s largest transport traces have been the most important beneficiaries of subsidies from Beijing for scrapping previous ships.

China Cosco, together with China Shipping Development and China Shipping Container Lines (CSCL) have acquired a minimum of 2.4 billion yuan ($359 million) in subsidies over 2014, a five-fold enhance in comparison with the earlier yr, in line with Reuters calculations based mostly on firm filings.

While the programme, designed to speed up fleet renewal, is because of run solely till the top of 2015, Beijing has signalled continued help and an unwillingness to permit massive shipyards to go beneath.

Industry insiders and analysts say Beijing’s help for nationwide companies is making a dependence on help that will likely be sustained with no business upturn in sight. For the International Chamber of Shipping, representing the worldwide service provider fleet, the help artificially boosts shipbuilding simply because the sector faces a surplus of ships.

The market has additionally been hit by slowing commerce exercise, a lot of which has stemmed from softer demand from China, which dragged down the Baltic Exchange’s most important sea freight index to an all-time low in February.

CSCL, proprietor of the world’s seventh largest container ship fleet, mentioned in a separate assertion it swung to a web revenue of 1.06 billion yuan in 2014, in comparison with a lack of 2.65 billion yuan within the earlier yr. Revenues rose 5.5 p.c, it mentioned. ($1 = 6.2103 Chinese yuan renminbi) (Editing by Tom Heneghan)