China Shipping executive sees grim outlook

A top executive of China Shipping Container Lines said Tuesday that freight rates from Asia to Europe have tumbled to the lowest level in the firm's history and that the global financial downturn has left the outlook for demand and rates grim.

   Fuel prices have come down but the U.S. financial turmoil has spread to other economies, CSCL managing director Huang Xiaowen told Reuters in an e-mail. CSCL's operating environment remains grim in the fourth quarter. The Shanghai-based carrier reported a $39.7 million third quarter net loss, citing lower demand and higher fuel prices. It was the first quarterly loss for the firm since it was listed on the Shanghai Stock Exchange in 2004.

   Goldman Sachs predicts CSCL will post a $55.6 million loss for all of 2008 compared to the $175.7 million net profit CSCL reported in 2007.

   While Huang said the prospect of rates falling sharply lower is unlikely, the container shipping industry appears to have fallen into trough and it is difficult to predict when it might recover.

   However, Huang said CSCL raised $2 billion in a November 2007 share sell and is not experiencing a cash flow problem.

   We will stick to our capacity expansion plan and won't cancel any ship orders or delay delivery, Huang told Reuters.

   The firm expects to take delivery on three new vessels over the next two years, adding about 4 percent, or 18,300 TEUs, to its total fleet capacity.

   In a recent analysis, Goldman Sachs said it did not expect CSCL to generate a positive economic return over the next two years. Credit-Suisse, in a recent analysis, said that despite CSCL already being priced as a distressed asset, we think it will survive this down-cycle.  

Source: American Shipper