COSCO to resume port investments
Container-shipping giant aims at the development of growing market
28 April 2011
BEIJING – China Ocean Shipping (Group) Company (COSCO), the largest container ship operator in China and the sixth-largest in the world by volume, will resume its investment in ports, said Wei Jiafu, the president and chief executive officer of the group, on Tuesday.
High demand and robust global economic growth between 2003 and 2008 prompted shipping companies worldwide to deepen investment in ports. However, enthusiasm cooled after the sudden eruption of the global financial crisis and the ensuing fragile economic recovery.
“I believe now is a good time to go bottom-fishing,” Wei told China Daily, without disclosing details of the group’s investment plans.
In July, COSCO bought a 13.7 percent stake in Yantian port in Shenzhen from the Copenhagen-based AP Moller-Maersk Group, the world’s largest container ship operator by volume.
The deal cost COSCO $520 million, a discount of “nearly half the price” the two groups had negotiated before the crisis, Wei said. The current monthly profit from the port stands at $5 million, he added.
Ji Yuntao, an analyst with Citic Securities Co, agreed with Wei’s overall assessment. However, he did not think COSCO’s move may lead to another wave of investment in ports.
“It is an excellent time to invest in ports, but because of the financial crisis, only a handful of large-scale companies have enough money to take this opportunity,” Ji said.
He added that more investment in ports will help COSCO further strengthen its industry chain and reduce its container-shipping costs.
“But given the current sluggish global economic recovery and China’s shift in focus from rapid GDP growth to upgrading its industrial base, the shipping industry is unlikely to see a booming market in the near future,” he said.
“It may take some time for COSCO to gain substantially from the ports,” he added.
In 2010, COSCO Shipping Co, the group’s cargo-shipping division, saw revenue increase by 13 percent year-on-year to 4.4 billion yuan ($682 million), and net profit shot up by 150 percent from 2009 to 340 million yuan.
In 2008, COSCO group signed a 3.4 billion euro ($5 billion) deal for 35 years of management rights for Pireaus port, the largest port in Greece and one of the major ports in the eastern Mediterranean. It was the first Chinese company in the industry to invest in foreign ports.
This year marks the 50th anniversary of COSCO’s foundation, and Wei said the group will continue its development by further investment in research and development, especially in the new-energy industry.
“By 2020, COSCO will become the (global) leading conglomerate in the shipping industry,” he said.