COSCO hurt by global shipping slip
China’s state-owned shipping giant COSCO has outgrown itself at one of the worst possible times.
The freight shipping company has seen its fleet size more than double over the last decade, but that growing capacity can’t deal with a slowing global economy that has hit the brakes since record-breaking growth levels in the early 2000s.
COSCO is taking action, demanding that ship-owners reduce rental costs, while simultaneously working to put political pressure on Beijing to halt competition within the industry.
“Being the key import country in the dry cargo business and almost everything else, they want to throw their weight around and secure more of the business themselves,” Anders Karlsen, an analyst for Nordea Markets, told Reuters.
COSCO recently halted some payments for vessels it had chartered to negotiate better terms, which angered many in the shipping industry. Some ship-owners threatened to seize COSCO-operated vessels.
“For any charterer not to pay hiring costs in an attempt to renegotiate charter rates is very bad business,” Arthur Bowring, managing director of Hong Kong Shipowners Association, told Reuters.
“If there are people out there doing that and COSCO is one of them, I do hope it will come back to bite them.”
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COSCO has reportedly reached deals with ship-owners on 18 vessels, and Greece-based DryShips said that the company had resumed payments on three of its ships.
Many shipping contracts held by COSCO were struck in 2008 during the global shipping explosion, when large capesize vessels were being rented by COSCO and other shipping companies for more than $100,000 a day.
According to Reuters, the dry bulk market has fallen sharply since then, “leaving COSCO paying 2008 prices for ships that now rent for less than $25,000 a day.”