COSCO Prince Rupert

Cosco Shipping’s $251m net profit last year was largely thanks to $230m of subsidies from the Chinese government, according to Alphaliner.

The consultant said the financial aid included $122m for vessel demolition and $107m in “other unspecified government subsidies”.

Alphaliner said that since 2010, parent organisation Cosco Shipping Holdings had received subsidies of $1.34bn from its government, of which some $700m was provided for vessel scrapping.

A subsidy of around $400 per LDT is paid to a Chinese shipowner that recycles a China-flagged ship at a Chinese breaker’s yard and, when added to the actual scrapping rate, is effectively twice the amount paid in demolition sales by yards in India, Bangladesh and Pakistan.

Beijing launched the subsidy programme in 2013 with a view to cutting vessel overcapacity and modernising China’s merchant fleet; due to expire at the end of 2016, it has been extended.

After merging with compatriot state-owned carrier China Shipping Container Lines (CSCL), in March 2016, Cosco completed the $6.3bn acquisition of Hong Kong-based OOCL in June last year, usurping CMA CGM as the world’s third-biggest container line, with a fleet capacity of 2.8m teu.

And it has, at least on paper, taken over as ‘lead line’ from the French carrier in the Ocean Alliance, where the third member of the VSA grouping is Taiwan’s Evergreen.

Cosco remains hugely ambitious and recent speculation is that it could be preparing a bid for Singapore’s niche carrier, Pacific International Line (PIL), which is the tenth-ranked carrier with a fleet capacity of some 420,000 teu.

By acquiring PIL, Cosco would get closer to second-placed MSC in the rankings. It operates around 3.4m teu of capacity and is starting to catch Maersk, which says has “no plans” to expand its 4m teu fleet.

Meanwhile, like privately owned MSC, Cosco is opting for exhaust gas cleaning systems (scrubbers) on many of its largest ships in order to comply with IMO 2020, and will still be able to burn cheaper 3.5% sulphur content heavy fuel oil (HFO) after 1 January next year.

Alphaliner noted that Cosco had completed the pilot installation of scrubbers on two of its smaller ships, the 2013-built 4,253 teu panamax vessels Cosco Aqaba and Cosco Ashdod. It said following the successful trials, the carrier had advised it would retrofit scrubbers on more ships, although it did not reveal the number concerned.

However, news today from the marine division of Sweden’s Alfa Laval suggests Cosco is the subject client of its most recent scrubber contract. It said “a leading Chinese shipping company” had chosen its scrubber systems for retrofit installation on “31 vessels, which are among the largest in the world”.

With compliant low-sulphur fuel oil (LSFO) expected to command a premium of around $200 a tonne – 50% higher than the current price of HFO – Alphaliner said there was “a growing list” of carriers looking to gain operational cost advantage over competitors by equipping their vessels with scrubbers.


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    April 03, 2019 at 3:40 pm

    That doesn’t count the $26.5 Billion China has committed to COSCO between 2016 and 2020, and another $26.5 Billion between 2021 and 2015.