China Shipping Container Lines Co, Asia's second largest container line, said it will beat its profit forecast after raising rates for shipments from Europe and carrying more cargo from the US.
Shipping lines are carrying more out of US ports this year as a 10.3 per cent decline in the dollar cuts overseas prices for exporters including Caterpillar Inc.
Profit this year will be 'significantly better' than the 3.18 billion yuan (S$622.5 million) previously expected, chairman Li Shaode said in an interview last week in Shanghai, without giving a new figure. 'Fewer empty boxes help cut costs on US routes.'
The company will earn 2.63 billion yuan, according to the average of nine analyst estimates compiled by Bloomberg.
Shipping lines are carrying more out of US ports this year as a 10.3 per cent decline in the dollar against a basket of major world currencies cuts overseas prices for exporters including General Electric Co and Caterpillar Inc. China Shipping raised rates for shipments from Europe to Asia by US$500 a box on Oct 1, Mr Li said.
'We are definitely seeing some accelerating growth in US exports, which will help out with the returning boxes,' said Jack Xu, an analyst at SinoPac Securities in Shanghai. 'The outlook for Asia-US trade next year is not encouraging' as the appreciation of the yuan may dampen China's export growth.
China Shipping's vessels are now about 40 per cent full on voyages from the US, compared with about 10 per cent in the whole of 2006, said Mr Li. Almost all vessels are completely full on sailings to the US, he said.
US exports rose 10.7 per cent in the first nine months. The country sold US$55.2 billion of goods to China last year, its fourth biggest export market behind Canada, Mexico and Japan. More than 90 per cent of world trade moves by sea.
The rising traffic is helping China Shipping and larger rival China Cosco Holdings Co offset a 63 per cent increase in fuel prices this year in Hong Kong.
Shipping lines have been unable to raise rates for carrying boxes from Asia to the US this year, as capacity has increased in line with demand. China Shipping's total sales on trans-Pacific routes rose 6.7 per cent in the third quarter, trailing a 19 per cent rise in volume, according to a Nov 11 statement.
'There may be opportunities to increase container rates next year' on China to US routes, Mr Li said.
An 11 per cent rise in traffic on Asia-Europe routes helped boost sales 67 per cent in the quarter. Full-year volume on routes from Europe to Asia may climb 30 per cent, Mr Li said.
China Shipping may raise as much as US$2.1 billion before the end of the year, selling as many as 2.34 billion shares to be listed on the Shanghai stock exchange. Proceeds will be used to buy new ships, the company said.
'Investors will welcome the sale because in the domestic share market some comparable peers are trading at high valuations,' said Mr Xu.
China Cosco's Shanghai shares trade at 31 times next year's estimated earnings compared with 14 times for its Hong Kong stock, according to data complied by Bloomberg. The company raised 15 billion yuan in a Shanghai share sale in June. China Shipping trades at 17 times in Hong Kong.
The potential value of China Shipping's share sale was calculated based on Friday's HK$6.99 closing price for its Hong Kong-listed stock. The shares have surged more than fivefold this year. China Shipping (Group) Co, the parent company, plans to put all of its container-related assets into the listed unit, including terminals and logistics divisions, said Mr Li.
The parent plans to double its container berths worldwide to 50 by 2010, expanding its capacity to 36 million containers a year, said Mr Li. The company is in talks to invest in terminals in Los Angeles and South-east Asia, he said. It recently agreed to buy a 20 per cent stake in a venture in Damietta, Egypt.
China Shipping is adding more capacity on routes to Australia and the Middle East. The company's traffic within China may also rise more than 60 per cent this year as congestion and higher diesel prices cause companies to look for alternatives to moving goods by truck.
'We're seeing opportunities as companies which used to move containers by truck are now considering ships,' Mr Li said. 'It's a niche sector that has been ignored in the past.'
Domestic traffic accounted for about a quarter of the shipping line's total volume in the three months ended September. The company expects to carry a total of 9.5 million 20-foot equivalent containers this year, compared with its previous forecast of 8.5 million.
RELATED