In the first half of 2018, in light of the overall continuous recovery of the global economy, demand for container transportation grew moderately and global cargo volume increased by 6.2% as compared to the same period of last year. However, due to the concentrated delivery of large container vessels during the same period, the growth in global capacity exceeded the growth in demand, which put downward pressure on the market price. In the first half of the year, the average of the China Containerized Freight Index (CCFI) was 797 points, representing a decrease of 3.8% as compared to the same period of last year, while the average CCFI for the second quarter recorded a decrease of 4.6% as compared to the first quarter of this year. Meanwhile, surging bunker prices resulted in the increase of the cost of liner companies.
In the first half of the year, COSCO SHIPPING Holdings made full efforts to improve performance, to develop new business and to innovate, and also proactively dealt with the adverse effects of the market and achieved hard-won results
During the Reporting Period, due to the operating performance of the container shipping business, which was better than the industry average, and the profit contribution of the terminal business, COSCO SHIPPING Holdings maintained profitability and realized net profit attributable to shareholders of the Company (the “Shareholders”) of RMB40,796,000. COSCO SHIPPING Lines Co., Ltd (中遠海運集裝箱運輸有限公司) (“COSCO SHIPPING Lines”), a wholly-owned subsidiary of the Company, achieved a shipping volume of 11.235 million TEUs, representing an increase of 12.4% as compared to the same period of last year, which exceeded the average increase of shipping volume in the market. Benefitting from the economies of scale and the improved management, COSCO SHIPPING Ports Limited (“COSCO SHIPPING Ports”), a non-wholly owned subsidiary of the Company, achieved a total throughput of 56.707 million TEUs, representing an increase of 26.5% as compared to the same period of last year.
Both of the two major capital operation projects of COSCO SHIPPING Holdings have achieved important progress. On 26 June 2018, the Company’s application for the non-public issuance of A shares was approved by the Public Offering Review Committee of the CSRC. On 20 August 2018, the Company has received the Approval regarding the Non-public Issuance of A Shares of COSCO SHIPPING Holdings Co,. Ltd. issued by the CSRC.
On 29 June 2018, all the pre-conditions to the offer (the “Offer”) for the acquisition of Orient Overseas (International) Limited (“OOIL”) made by Faulkner Global Holdings Limited (a subsidiary of the Company) (“Faulkner Global”) and Shanghai Port Group (BVI) Development Co., Limited (上港集團BVI發展有限公司) (a subsidiary of Shanghai International Port (Group) Co., Ltd.) (the “Joint Offerors”) were fulfilled. On 6 July 2018, the Company, the Joint Offerors and OOIL issued the composite document to all shareholders of OOIL. On 27 July 2018, the Offer closed, and valid acceptances of the Offer received by the Joint Offerors represented approximately 98.43% of the issued shares of OOIL as at that date. As such, the acquisition of OOIL was successfully completed. This acquisition is the most important merger and acquisition project since the establishment of China COSCO SHIPPING Corporation Limited and also the largest merger and acquisition in the global shipping industry so far in terms of the size of the transaction. COSCO SHIPPING Holdings became the controlling shareholder of OOIL and will soon open a new chapter of developing “dual brands”.
Adhering to strategic guidance and promoting large-scale development and globalization, achieving remarkable results in the development of emerging markets, with the Ocean Alliance having maintained its advantages in providing services
As at 30 June 2018, the size of the container fleet operated by the Company reached 393 vessels and 2.04 million TEUs. The shipping capacity increased by 15.8% as compared to the same period of last year, which exceeded 2 million TEUs for the first time and achieved a historic leap.
During the first half of the year, the nine large container vessels newly delivered were all utilized in main shipping routes in Europe and America. The shipping capacity replaced was mainly put in emerging markets. The Company added a number of routes relating to emerging markets including the Far East - South Africa, Far East - west of South America, Europe - west of South America, and South Asia - Europe, which have further improved the layout of the global route network. During the first half of the year, the shipping volume of the Company in emerging markets increased by 27%, which was significantly higher than that for the routes in Europe and America.
The Ocean Alliance (of which the Company is a member) started to operate the “Day 2 Product” in early April this year. Consisting of 42 services involving 335 vessels and capacity of 3.6 million TEUs, the Ocean Alliance has the most comprehensive network and service with a leading role in coverage and frequency by providing services to 621 port-pairs. As a result, the competitive advantages of the Company in the east-west services have been consolidated.
Continue to strengthen the layout along the “Belt and Road” and to leverage the synergies of ports and shipping to provide customers with “end-to-end” transportation solutions
As at 30 June 2018, the Company had put approximately 189 vessels and 1.25 million TEUs in use along the routes of the “Belt and Road”, which represented approximately 60% of the Company’s total fleet size. Most of the controlled and non-controlled terminals of the Company are located along the routes of the “Belt and Road”, with a total of 274 berths under operation, including 184 container berths with an annual handling capacity of 102.29 million TEUs. In the first half of the year, terminal throughput in overseas regions increased by 36.8% as compared to the same period of last year. Among them, Singapore COSCOPSA Terminal has added one berth since the beginning of this year, with a significant increase of 63.3% in the throughput. The Company has fully played the role of the Port of Piraeus in Greece as the bridgehead of the Maritime Silk Road, and increased the number of self-operating fleets and connectivity to the Alliance. In the first half of the year, the throughput of the Port of Piraeus increased by 18.4% as compared to the same period of last year.
Meanwhile, taking into account the layout of these shipping routes, the Company actively developed the sea-rail transportation business and contributed to the construction of the “Silk Road Economic Belt”. In the first half of the year, the number of regular trains operated for the “China-Europe Sea-rail Express” relying on the Port of Piraeus in Greece reached 475, with the cargo volume increased by 100% as compared to the same period of last year. The Company cooperated with China Railway Corporation* (中國鐵路總公司) and launched three international trains lines, i.e. Tianjin to Moscow, Nanchang to Moscow, and Lianyungang to Almaty/Tashkent. At present, the Company has a total of 110 foreign trade railway lines departing from China, 150 domestic trade lines, and 20,000 to-door-service points (到門網點), which provided customers with diversified choices and “end-to-end” transportation solutions.
Actively grasp the development trend of digitalized shipping to improve customer experience and enhance service standards
As an exploration and innovation in digitalized shipping, the Company promotes information sharing with customers and external partners. In the first half of the year, the Company cooperated with JD.COM (京東商城) and Good-farmer (佳農) to launch the function to trace the origin of Ecuador’s bananas by using the block-chain technology, and actively participated in the big data platform project for Shanghai’s import customs clearance to promote fast customs clearance of import and export of goods in Shanghai, which improved customer experience. In addition, the Company has also completed the research and development and testing of the marine booking platform for exhibitors at China International Import Expo. On the basis of the Pan-Asian e-commerce platform, the Company has also formally established a foreign trade e-commerce working group to provide customers with a package of services, striving to realize complete online trading for foreign trades. By being customer-oriented, the Company further promoted nine service standards globally, established the standardization process for import and export customer services, provided core customers with personalized and customized services, and further improved customer experience through the application of information technology.
Implement a dual-brand strategy and leverage synergies
Upon completion of the acquisition of OOIL, the shipping capacity of the container shipping business segment of COSCO SHIPPING Holdings exceeded 2.7 million TEUs, its shipping capacity exceeded 3 million TEUs including order book, and the Company ranked third in the world in terms of shipping capacity. The two brands “COSCO SHIPPING” and “OOCL” will achieve synergistic development. The front desk sales and customer service systems of the two companies will remain unchanged to ensure the continuity of customer services; while middle and back desk functions such as cost control will be gradually optimized to improve operation efficiency and service standards, which is expected to result in obvious synergies in areas such as route networks, information systems, container fleets and supplier procurement. Synergies will be carried out under the unified organization and coordination of COSCO SHIPPING Holdings, which will be implemented by the two liner companies. To this end, COSCO SHIPPING Holdings has newly appointed six deputy general managers who were from COSCO SHIPPING Lines and OOCL, and established a Synergy Management Office to have a clear division of labor and to improve the working mechanism. Relevant work streams have commenced.
Looking forward to the second half of 2018, the world economy will remain on the path of recovery. Although trade protectionism is on the rise and Sino-US trade frictions may inhibit the growth of the global economy to a certain extent, it is expected that the global economy will continue its growth since 2017, thus providing guarantee for the growth of container shipping volume. In terms of shipping capacity, currently orders of container vessels are at a historically low level and the pressure on capacity delivery has slowed down. Meanwhile, after this round of consolidation, the future development of the container shipping industry will be more sustainable and the container shipping market will tend to be more stable. In terms of ports, with the synergies between the Ocean Alliance and the fleets of the Company, the throughput of the terminal business of the Company will continue to increase in the second half of the year. COSCO SHIPPING Holdings has already stood at a new historical starting point. Under the leadership of the Board and the new management team, the Company will focus on the four strategies of “globalization, end-to-end, digitalization and dual-brands” to integrate container shipping, ports and supply chain capabilities, striving to achieve the synergies of the dual-brands of container shipping. The Company will also further promote coordinated development of the container shipping and terminal businesses, provide customer-oriented and differentiated services, and build the Company into a world-class provider of integrated container shipping services, hence creating value for customers and returns for Shareholders.