Page 9: of Maritime Reporter Magazine (March 2013)

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WWW.MARINELINK.COM 9Analysts: Incompetent Management isSinking CoscoTwo years of billion dollar losses and no pro Þ tability in sight have rattled Cosco investors and may threaten the charismatic chairman?s position. In the mid-2000s, Cosco Holdings chairman Wei Jiafu was one of China?s rock stars. Now irate investors want him held accountable for the mess into which China?s largest shipping line has steamed headlong. In a damning article, China?s respected publica- tion Caixin Online reported that analysts believe Cosco?s management to be more incompetent than the carrier cared to admit. Management has stumbled along making strategic miscalculations, bungled investments with hedging tools, long-term leases signed at the wrong time, blind expansion, the Caixin report said. Even the swiftest glance at the balance sheet will reveal a gaping hole where proÞ tability used to be. Cosco lost almost $1.7 billion dollars in 2011 and last year lost almost as much. Anoth- er red year will see Cosco forced to suspend trading on the Shanghai Exchange until it makes a proÞ t, and if the carrier returns four years of losses in a row it will be delisted. That is an almost unthinkable position for the pride of China?s shipping ß eet to be in. Back in happier times, Capt Wei would swoop into conferences and take to the stage surrounded by the adoring media. (An interesting exercise would be to tally the Lifetime Achievement, Personality of the Year or Newsmaker awards he racked up while on top of the heap.)An analyst quoted in Caixin?s riveting report blames the dry bulk division of the group for much of the problem, which made up the bulk of the 2010 losses. A third of its 337 dry bulk ß eet was leased, which placed an immense drag on pro Þ tability. The analysts noted that competing shipping lines with large bulk ß eets posted better results. Its fellow state-owned line, China Shipping, fared better because it was big in domestic shipping. But the ß eet expansion strategy was where the real damage was done. Cosco Holdings expanded blindly and did not have a long-term strategy, said yet another analyst, this one ?familiar with Cosco Holdings track record?, whatever that means.Contributing to the huge operating losses were the forward freight agreements, a Þ nan-cial derivative that has caused much pain in the shipping world. The analyst said Wei should be held accountable for that, a sentiment apparently shared by some investors.But Beijing also appears to have grown weary with the sustained losses incurred by Cosco Holdings. An internal bank document Caixin found showed that state-owned banks were told to reduce their credit line to the carrier. Wei has reportedly appealed for a bailout from Beijing but has so far been ignored. His fall from grace now seems assured.Posted by Greg Knowler on Maritime It?s ?Hunky Dory? On Manning & Training Front Encouraging updates from the manning and training sector in India present a healthy picture of the industry. It appears that the future is set to get brighter as was revealed in a panel discussion held under the aegis of the Company of Master Mariners of India. Participants included:- Capt S. M. Halbe, Managing Director of Gulf Energy Maritime Services, and - Capt Birendra K Jha, General Manager of Mitsui O.S.K. Lines Maritime (India) - Capt K. N. Deboo, Principal of Anglo Eastern Maritime Training Center, and - Capt C. L. Dubey, Principal of Mumbai Maritime Training Institute. The discussions yielded some revealing facts. It was established that just Þ nding competent people in the seafaring profession was not as vital as selecting the right people. It was underscored that training goes hand-in-hand with the selection process. There is no dearth of opportunities, and there is growth seen in manning. But the market is bad especially in the tankers segment which is seeing many vessels getting scrapped. Ship owners are looking at cost cutting. But the discussions boiled down to the main issue about whether Indian seafarers would ultimately suffer the same fate as the European seafarers who were found to be expensive to employ?The claims generally made in regards to retention and attrition by most man- ning companies appears to be exaggerated, as there is a tendency to present a rosy picture to shipowners. One reason being that oil majors go by the past 10-year record and they prefer a retention rate of over 90%. As a result, shipowners are forced to retain seafarers. Posted by Joseph Fonseca on MR #3 (1-9).indd 9MR #3 (1-9).indd 93/2/2013 7:30:07 PM3/2/2013 7:30:07 PM

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