Global emerging markets crucial for survival of shipping firms

Updated: 2011-12-20 08:04

By Wang Ying (China Daily)

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Global emerging markets crucial for survival of shipping firms
A China Shipping (Group) Co' container at Humen Port in Dongguan,Guangdong province.The company shipped a total cargo of 135.87 million tons, up 20.74 percent year-on-year in the first 11 months of this year.[Photo/China Daily]

SHANGHAI - As the world's advanced economies continue to show signs of contraction, China Shipping (Group) Co (CSG), a State-owned shipping conglomerate, has decided to navigate into the emerging markets to offset thinning orders and seek even larger earnings.

The European and US markets are running into economic difficulties, and so more efforts should be made to explore the emerging markets in Africa and South America, said Li Shaode, chairman of CSG.

During the nation's recently concluded Central Economic Work Conference, China's policy makers urged domestic businesses to upgrade and diversify their export structures to maintain robust export growth.

"Our answer to the saturated market and the gray economic outlook for those developed markets is to expand our presence in emerging economies," said Li.

According to Li, the majority of emerging countries boast plentiful supplies of natural resources, something that China desperately needs to keep its economic juggernaut on track.

In addition, high-quality Chinese light-industrial and consumer products are very popular in the emerging markets, Li added.

He admitted that the ongoing European debt crisis, plus the fallout from the global financial meltdown in 2008, have dented the entire shipping industry, and it will be almost impossible for enterprises to come through the hardships unscathed.

"It may have been possible for a company to get through the financial crisis of late 2008 and 2009. But as the industry enters a low season in the next two and three years, the current difficulties have become more significant, and will require the joint power of the whole industry," Li said.

According to the CSG chairman, shipping companies globally have posted wide losses since 2009, because of a decline in freight rates, the rising cost of fuel and overcapacity within the industry. Fuel costs alone account for between 40 and 50 percent of total shipping costs at the moment.

"The best way to overcome difficult times is to join hands with the whole industry and win support from the central government," Li commented.

And he said that the entire industry chain should develop diversified cooperation and establish joint ventures.

In the first 11 months of this year, the Shanghai-based CSG shipped a total cargo of 135.87 million tons, up 20.74 percent year-on-year, earning profit of 1.134 billion yuan ($178.4 million).

The company estimates that whole-year profit will reach 1.3 billion yuan, adding up to a third straight year of profits and with aggregate profit of more than 3 billion yuan in the past three years.

Even the world's container shipping giant, Maersk Line, the container division of AP-Moller Maersk Group, posted a third-quarter net loss of 1.58 billion Danish krone ($277 million), Bloomberg reported.

The Copenhagen-based company said its container-shipping unit will lose money this year.