By Joanne Chiu
HONG KONG-- China Shipping Development Co., one of the nation's
biggest shippers of bulk cargoes and oil, expects to return to a
profit for the first quarter, in a possible sign of better times to
come for the depressed dry bulk shipping market.
The company, a unit of China Shipping (Group) Co., said late
Thursday it expects a first-quarter net profit of up to 60 million
Chinese yuan (US$9.7 million), rebounding from a year-earlier loss
of CNY484 million.
The turnaround is due to an increase in freight rates in the
bulk and oil shipping market since the start of this year, as well
as a significant increase in investment income from joint ventures,
the company said.
The positive earnings forecast comes not long after the after
the Hong Kong and Shanghai-listed shipping operator reported a 2013
net loss of CNY2.23 billion. An oversupply of shipping capacity and
slower economic growth in China have weighed on dry-bulk shipping
rates.
The world's shipping downturn is entering its sixth year. Many
of the large ships that were ordered before the 2008 financial
crisis were put into service just as the economic slowdown slashed
cargo demand, and overcapacity has kept freight rates subdued
despite a pickup in some key routes.
Adding to concerns is weak trade data from China, whose February
exports were down 18.1% from a year earlier. Economists had
expected a 5% increase.
However, strengthening demand for commodities in Asia, driven by
a gradual recovery from the global economic downturn, sent the
Baltic Dry Index, which tracks the cost of bulk shipping, to a
one-year high of 2,337 in December, nearly tripled from a 12-month
low of 801.00 in June.
The Baltic Dry Index has surged over 40% as of Wednesday from a
year earlier, indicating improved demand for shipments of coal,
iron ore, grain and other commodities.
Hong Kong-listed shares of China Shipping Development jumped as
much as 6.2% on Friday on the back of the positive earnings
forecast.
Barclays Capital said in a note it remains positive on the
company.
"We expect the recovery of domestic coal and international dry
bulk volumes and freight rates from the cyclical trough experienced
in 2012-3Q13 to drive a continued narrowing of quarterly losses,"
Barclays said.
Write to Joanne Chiu at joanne.chiu@wsj.com
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