China Cosco Has Wider-Than-Estimated $432 Million Loss on Shipping Slump

China Cosco Holdings Co., the shipping line that’s had at least three vessels seized in payment disputes, slumped to a larger-than-expected first-half loss because of plunging cargo rates and rising fuel costs.

The nation’s largest shipping line lost 2.76 billion yuan ($432 million), with both its container and commodity units being unprofitable, according to a Hong Kong stock exchange filing yesterday. The Tianjin, China-based company has tumbled 40 percent in three months, compared with a 14 percent decline for the Bloomberg Dry Ships Index.

“China Cosco is facing the biggest challenge since the global financial crisis,” said Huang Wenlong, a Hong Kong-based analyst with BOC International Holdings Ltd. “I am very pessimistic about the second half because the growth rate in shipping capacity is unprecedented.”

The state-controlled company’s first-half sales from moving commodities tumbled 27 percent, 10 times the pace of decline in volumes, while average container rates fell 14 percent as an expanding global fleet boosted competition. The two units also both had 27 percent increases in fuel costs, mainly because of higher prices.

Separately, the company said its board approved plans by an overseas unit to issue as much as $2 billion of dollar-denominated bonds for general use. As at the end of June, the shipping line had cash and cash equivalents of 43.8 billion yuan, down from 46.7 billion yuan six months earlier.

China Cosco’s shares rose 0.5 percent to HK$4.20 at 10:16 a.m. in Hong Kong. They fell 1.1 percent to 7.15 yuan inShanghai.