China Cosco Raises 15 Billion Yuan to Buy New Ships : Update

China Cosco Holdings Co., operator of Asia's largest container line, sold 15 billion yuan ($1.97 billion) of stock in Shanghai to buy new ships.

Investors bought 1.78 billion shares at 8.48 yuan each, the top end of the price range, on June 18, the company said in a Shanghai stock exchange statement today. The sale was the fourth biggest in China this year, according to Bloomberg data.

The company plans to use the funds to help its container- shipping unit pay for 12 new ships and to buy a stake in a logistics company. Shipping lines are adding more vessels as Wal-Mart Stores Inc. and other retailers sell more Asian-made clothes, toys and televisions in the U.S. and Europe.

``The company needs to fund the expansion of its fleet and raising money in China is very easy right now,'' said Ji Lijun, an analyst at Shanghai Securities Co. ``The move is also in line with the government's directive to list more state-owned companies on mainland stock markets.''

The Tianjin-based company sold 535 million shares to strategic investors, 356.9 million to institutional investors and 891.9 million to individual investors. Strategic investors have to hold their shares for a year, while the lock-up period for institutional investors is three months, the company said. China International Capital Corp. arranged the sale.

Chinese companies have sold more than 130 billion yuan ($17 billion) worth of shares in Shanghai and Shenzhen this year. Ping An Insurance (Group) Co., the nation's second-largest insurer, raised 38.9 billion yuan in February in the largest domestic share sale this year.

Ship Orders

China Cosco plans to spend 6 billion yuan of the sale proceeds on new vessels it has already ordered, according to a share sale document. It will also use 1.68 billion yuan to buy a 51 percent stake in Cosco Logistics from its state-owned parent Cosco Group and another 401 million yuan for projects being developed by the logistics unit.

China Cosco had a total of 26 container vessels on order at the end of 2006, with a combined capacity of 166,320 twenty-foot boxes, it said in March. Its Cosco Container Lines Co. unit operated 139 vessels with a combined capacity of 399,237 twenty- foot equivalent units at the end of last year.

The price of ships is climbing because of higher demand. A new vessel able to carry 6,200 20-foot standard containers cost a record $105 million last month, 4 percent more than at the end of 2006, according to Clarkson Plc, the world's biggest shipbroker. Shipowners ordered a record $105.5 billion worth of new vessels last year, according to the London-based company.

Rising Rates

Container-shipping rates have also gained this year. The Howe Robinson Container Index, which tracks the charter market for container-shipping lines on a weekly basis, stood at 1254.3 on June 13, according to the Korea Maritime Institute. That's the highest since Sept. 20.

``The outlook for the container-shipping industry has improved as freight rates are recovering,'' said Karen Chan, an analyst at Credit Suisse Group in Hong Kong. ``Hong Kong-listed mainland companies selling A shares in the domestic market are also popular among investors. China Cosco is no exception.''

China Cosco raised HK$9.52 billion in an initial public offering in Hong Kong in June 2005. The shares, which rose 2 percent to HK$11.10 at 10:15 a.m. in the city, have more than doubled from their IPO price.

China Cosco aims to find new revenue sources as the launch of new vessels intensifies competition in the container-shipping industry. The global container fleet's capacity may increase about 14 percent over the next two years, while demand may expand 12 percent, Credit Suisse Group said in a Feb. 5 report.

AP Moeller-Maersk A/S, owner of the world's largest container line, had a total capacity of 11.3 million units at the end of 2006, according to Containerisation International.

China Cosco also owns a 51 percent stake in Cosco Pacific Ltd., Asia's third-largest container terminal operator.

source:www.bloomberg.com