Asia/Pacific News
Dry Bulk Has "Minimal" Room for Further Decline, Says Sinotrans, as Bunker Costs Cushion Widening Loss
Hong Kong-listed Sinotrans Shipping Ltd [HKG:0368] (Sinotrans) Monday announced a financial loss of US $81.5 million in 2015, a result that sees the company slip deeper into losses.
Last year the company registered a net loss of just $12.7 million.
The company also reported that both its dry bulk and container shipping segments lost money.
Sinotrans did however manage to slash its bunker bill for 2015, which fell to $164 million, down from $224 million in 2014, with Sinotrans Shipping saying it was the result of the fall in bunker prices rather than any efficiency measures reducing consumption.
Still, the costs of operating the container shipping business dropped as voyage costs, mainly comprised of bunkers and port charges, decreased by 36.6 percent in 2015.
The significant drop in bunker prices was said to have helped offset to a "certain extent" the negative impacts of market downturn.
The company characterized the dry bulk shipping market as "extremely sluggish", noting that the dominant force in dry bulk demand, China, continued to experience structural reform, significantly dwindling the growth of demand for major commodities.
The report suggested that supply and demand in the market became more imbalanced over the course of the year as a result of the decline in seaborne demand, even as new shipbuilding declined.
In its outlook for 2016 company executives said that the foundation of recovery was "unsolidified" and that the shipping market still faces "pressures and challenges."
Despite the difficult markets, the company reported that it realized an overall shipping volume increase of 13 percent.
Company officials also expressed some optimism about the future, suggesting that room for further decline in the market will be "minimal," and that seaborne demand will be stimulated by the significant decrease in prices of major commodities.
The company also said that disposal of aged vessels and a reshuffle of industry will expedite and facilitate a market recovery according the report.
The development of China's "One Belt and One Road" strategy and implementation of various free trade agreements will stimulate trading activities among countries in and lead to higher volumes on the Intra-Asia container shipping market the company predicted.
The company also expressed a hope that, in 2015, a new venture in the business of shipping liquified natural gas (LNG) in the Arctic will help diversify revenues.
The company announced in its report that it is cooperating with Dynagas Holding Ltd and China LNG Shipping (Holdings) Ltd to work on the Russian Yamal ice-class LNG carriers project, and has jointly invested in five new-building LNG carriers.
In October of 2015 Ship & Bunker reported that Sinotrans, "unfazed" by the downturn in the dry bulk sector, had ordered six newbuilds.
