Is Cosco Ship Scrapping Strategic?


Shanghai-listed Cosco Shipping Holdings, a subsidiary of Cosco Shipping Corporation Limited (Cosco Shipping), has revealed that it scrapped eight vessels during the fourth quarter of 2016.

The combined tonnage of the retired ships is around 410,000 dwt and they have been sold for a scrapping price of USD $31 million. The youngest ship sent to scrap was 15 years old. The disposal of the older vessels is seen as a move to lower the overall age of the fleet and in turn raise overall operational efficiency. According to the Hong Kong Exchange filing, the transaction resulted in a loss of $92.7 million.

The vessels that have been retired are: The 1998-built 3,400 teu Luo Ba He, 1997-built 5,618 teu Chuan He, 1997-built 5,618 teu COSCO Qingdao, 1997-built 5,618 teu Wan He, 1997-built 5,618 teu Yue He, 1997-built 5,618 teu Lu He, 2001-built 542 teu COSCO Ran, and 2001-built 542 teu COSCO Sakura. All of the ships were container vessels.

In a message to investors, Cosco said “As a result of the decommissioning of the vessels, the average age of vessels owned by the company has decreased, while the oil-saving level and overall environmental friendliness of the vessels have improved”.

They went on to say that “The board considers that the decommissioning of the vessels is conducive to enhancing the overall operational competitiveness of the shipping fleet of the company and is in the interest of the company and the shareholders as a whole”.

In recent related news, Cosco Shipping Ports announced their acquisition of a 16.82% stake in Qingdao Port International (QPI), operator of China's sixth busiest port.

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