Cosco reports $19 billion profit for 2022, but outlook darkens

Cosco Shipping Holdings on Friday (March 31) reported a record annual result for 2022, posting net profit of $19 billion as declining volumes across its trade lanes was offset by solid growth in revenue earned per container.

But even as the world’s fourth-largest container carrier put another highly profitable year to bed, Cosco warned in its earnings statement that the industry was entering a challenging period of a long-term slowdown in demand with an increasing supply of capacity.

“Geographical tensions, high inflation, and tightening monetary policies adopted by European countries and America will continue to pose challenges to global economic development and commodity trade,” the carrier statement noted.

“The container shipping industry is not only facing long-term issues such as the slowing down in demand growth, the evolving trade patterns, and the accelerating process of decarbonization, but also facing the practical challenge of intensified industrial competition and increased supply of transportation capacity,” it added.

While the 2023 outlook is challenging, the financial result for last year was highly positive. Average revenue per TEU across all the carrier’s trade lanes rose 22 percent year over year to $2,636, driving overall revenue of Cosco Shipping Holdings, parent company of Cosco Shipping and OOCL, up 19 percent to $57 billion. Earnings before interest and taxes (EBIT) was up 30 percent at almost $25 billion, while operating profit grew 27 percent to $23.7 billion.

Cosco Shipping Holdings shareholders will enjoy a dividend windfall, with the carrier planning to pay out between 30 and 50 percent of the $19 billion net profit.

Capacity concerns 

The Cosco group, including OOCL, has a total capacity of 888,928 TEU on order, or just over 30 percent of its total fleet currently in service, according to Alphaliner. The container shipping industry orderbook is the highest it has ever been, with 7.5 million TEU on order representing 28.8 percent of the current in-service fleet.

While Cosco expressed concern over container shipping capacity, the carrier noted that ship efficiency measures being implemented by the International Maritime Organization (IMO) to reduce emissions were expected to limit the impact.

“The implementation of the new IMO environmental protection regulations may accelerate the dismantling of old container vessels and impose restrictions on the speed of certain low efficiency vessels and may also impose restrictions on the effective supply of the shipping industry for a long period of time in the future,” it said.

Cosco Shipping Holdings also noted plans to use its growing fleet capacity to build services between China and emerging markets, regional markets, and the third-country markets that would serve both China’s domestic needs and international trades through a development pattern it called “dual circulation.”

Source: Journal of Commerce

To read the original report, please refer to: https://www.joc.com/article/cosco-reports-19-billion-profit-2022-outlook-darkens_20230331.html

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