Aug 25 (Reuters) - China COSCO Holdings , flagship of the country's premier shipping firm, posted a higher-than-expected net loss of 2.76 billion yuan ($430 million) for the first six months of the year due to falling freight rates and high oil prices.
China COSCO , which operates the world's largest bulk cargo fleet and is the No. 6 container shipping firm globally, said the outlook for the second half was complex and ever changing.
"There is excessive supply in the market. In the second half of the year, it is expected that the delivery of 8000+TEU large vessels will put pressure (on) the major routes," it said in a statement to the Hong Kong exchange late on Thursday.
The country's top shipping conglomerate has sought better terms for contracts signed during the peak of the market, but its move to halt payments to several shipowners in the last few weeks has threatened to taint its reputation within the international shipping community.
Most analysts have taken a bearish view on the global shipping market, arguing that freight rates in the dry bulk segment have limited upside due to looming overcapacity in the second half of the year.
Andrew Lee, an analyst at Nomura Equity Research, said it would be difficult for the company to negotiate contract rates down. "It is difficult because a contract is a contract."
China COSCO also said it had proposed U.S. dollar bond issuance of up to $2 billion with a term of no more than 10 years.
"In order to satisfy all capital needs of the company for future operation and after taking into account of the tight credit availability within the PRC and the fact that the company requires capital in U.S. dollars currency, the company intends to issue the bonds through its offshore-wholly owned subsidiary," the firm said.
BACK TO BLACK
Nomura expects the company to post losses of 3.3 billion yuan in 2011 and 1.15 billion in 2012 before returning to the black.
The Baltic Exchange's main Baltic Dry Index , which tracks rates to ship dry commodities such as grains and iron ore, dropped 20 percent in the first half due to a supply glut.
It rose to a near seven-month high of 1,602 on Wednesday on continued iron ore bookings to China, but was still about 10 percent below its end-2010 level and against an analyst expected break-even level of 2,000 for the company.
China COSCO reported a half-year net loss of 2.76 billion yuan compared with a 3.41 billion yuan profit a year earlier. The figure was higher than the average forecast of a 1.4 billion yuan loss from three analysts polled by Reuters.
The company warned on Aug. 9 it expected to make a net loss in the first half of this year.
Shares in the Hong Kong-listed firm have lost some 44 percent since the start of the year, underperforming the Hang Seng Index's 14 percent fall.
China COSCO's steep share price drop however makes its valuation seem reasonable for a minority of analysts despite the short-term overhang.
Out of the 21 analysts on Thomson Reuters Starmine, 12 have a "sell" or "strong sell" rating, while four rank it as a "buy" or "strong buy" and five have a "hold" rating. ($1 = 6.390 Chinese Yuans)