Shipping giant to issue corporate bonds
By Sun Min (China Daily)
Updated: 2004-04-12 08:42

China Shipping (Group) Company, one of the country's major shipping companies, will issue up to 2 billion yuan (US$242 million) worth of corporate bonds and seek public listings to enhance its capital strength.

The bond issuance has already got approval from the State Council.

Li Kelin, president of the group, said it would also undergo a shareholding restructuring in the future.

"When conditions allow, the group may seek an overall listing," he said.

Presently, the group already has two subsidiaries listed - the A-share listed China Shipping (Hainan) Haisheng Shipping & Enterprise Co Ltd, and China Shipping Development Co Ltd that has both A and H shares.

The group is also preparing for an initial public offering of its other business, the container lines, in Hong Kong this year, market sources said.

The subsidiary, China Shipping Container Lines Co Ltd, operates 39 international lines and eight domestic sea routes and has been expanding rapidly in recent years.

Based in Shanghai and State-owned, China Shipping (Group) Company is a shipping conglomerate that operates container ships, oil tankers, bulk carriers, passenger ships as well as terminals.

By the end of 2003, its revenue from shipping business had reached 31.9 billion yuan (US$3.9 billion), compared to only 6.7 billion yuan (US$809.1 million) in 1997 when it was first launched.

Last year, its realized profit was 3 billion yuan (US$362.3 million), ranking among the top ten of all central State-owned enterprises (SOEs) supervised by the State-owned Assets Supervision and Administration Commission (SASAC).

Li expects the group to reach 230 million tons of freight volume in 2004 and 3.5 billion yuan (US$422.7 million) of profit.

Instead of relying on government support, China Shipping has been following a self-reliant business model to rise from a loss-maker seven years ago to one of the leading shipping companies in China. It is a good example of how SOEs can also prosper in the market economy, said Ren Zhi, a division chief of SASAC's Bureau of Enterprise Reform.

To survive market competition, SOEs must have a decision-making procedure, grasp market opportunities timely and adjust their business aim accordingly, he said.

The shipping industry, for example, with its own business cycle and close links to the international economic and political climate, requires quick responses to the everchanging market, experts said.

Li Kelin, who had been a ship captain for a decade, has more skills than mastering a ship.

A shrewd businessman, he had increased ship rental and rebuilt some tramps into container liners at low costs in 1997 and 1998 when the market was low and quickly accumulated a fortune for his company.

Then he made another fortune during the West Coast port strike in the United States in 2002 by preparing additional containers in advance and seeking substitute ports, earning more than 500 million yuan (US$60.4 million) within a few months' time.

"This round of the business cycle of the shipping industry will last longer than before," said Li.

He expected the overall industry to continue to boom for at least another two to three years.

Fueled by the rosy domestic economy and improving world economy, China's foreign trade volume had grown by 35 per cent last year year-on-year and is expected to stay on the upward track this year.

That brews opportunities for the shipping companies as well as the ship-builders. The demand of oil, iron and steel imports, for example, will remain high.

Li said China Shipping would try to reconstruct its oil tankers and build a world-class tanker fleet by 2010, with 7.5-8.5 million deadweight tons.

Its container lines business is also expected to get a solid growth.

To ensure sufficient cash flow during the expansion, the group has also applied a global clearing system that can concentrate all the funds applicable in the subsidiaries, Li said.

By the end of 2003, the group's global business network had reached 152 ports in 75 countries and regions.

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