China Cosco Holdings scrapped another eight vessels in the second quarter, bringing its ship disposal total to 24 under its fleet renewal program, which aims to improve operational efficiency as the carrier struggles for profitability.
Four of the eight recently scrapped ships were container vessels operated by Cosco Container Lines. The state-owned shipping line did not disclose the capacity or price per vessel, telling investors only that the eight ships were sold for $20 million.
“As a result of the decommissioning of the vessels, the average age of vessels owned by Cosco Container Lines and China Cosco Bulk Shipping (Group) Company have decreased, while the oil saving level and overall environmental friendliness of the vessels have been improved,” the carrier told investors in a filing on the Hong Kong Stock Exchange. “The board considers that the decommissioning of the vessels is conducive to enhancing the overall operational competitiveness of the shipping fleet of the company and is in the interest of the company and the shareholders as a whole.”
Cosco has been taking advantage of Beijing’s new scrapping policy, which provides subsidies to carriers who demolish and build vessels in China. It scrapped 16 ships in the first quarter alone, raising $127 million for the troubled carrier.
After two consecutive years of losses, the company was last year one loss away from being delisted from the Shanghai Stock Exchange. However, Cosco reported an annual net income of ￥235.5 million (about US$38.3 million) in 2013, compared with net losses of ￥20 billion in 2011 and 2012, escaping the embarrassing delisting prospect largely through a series of asset sales to its parent company.
But the company restructuring is being felt well beyond the borders of China. Cosco Container Lines Americas announced a major restructuring move last week, saying it would close offices in Boston; Charleston, South Carolina; Chicago; Henderson, Nevada; New York; Norfolk, Virginia; San Francisco; and Seattle. All functions will be transferred to the new operations center to be opened by January 2015, the company said. In addition, most of the customer service and operation functions performed at the Secaucus, New Jersey, headquarters will be transferred.
The company said it plans to finish the restructuring by year’s end. Offices in Houston; Montreal; Toronto; Vancouver, British Columbia; and Long Beach, California, are not on the list of office closures.
According to data from PIERS, the data division of JOC Group Inc., Cosco’s market share of all laden containers moving in and out of the U.S. through May of this year stood at 4.1 percent, versus 2013 total market share of 4.4 percent and a 2012 market share of 4.1 percent.