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BUSINESS & TECH

Trans-Pacific Shipping To Drop 10% if U.S. Imposes More Tariffs on China Imports, COSCO Says

The world’s third-largest container shipping company said it expects trans-Pacific cargo volumes to fall by 10% if the U.S. imposes a 25% levy on a further $200 billion worth of Chinese imports, as could happen as early as this week.

COSCO Shipping Holdings Co. Ltd. said the trade war will have a bigger dampening effect on lower-value cargoes than on higher-value goods if the bilateral trade tensions escalate, but so far it sees little evidence that the industry is taking a major hit from the spat.

Total cargo shipments on Trans-Pacific routes between China and the U.S. had shown an uptick in the first half of the year, and booked a further expansion of as much as 10% in July, company General Manager Wang Haimin told reporters Friday during the company’s earnings conference.

Overall demand for Chinese goods will not be slashed immediately after the tariffs are imposed, as the U.S. is expected to maintain stable economic growth, he said. Even in the unlikely event that the U.S. halts all imports from China, it would still have to import goods from other markets in Southeast Asia, a route over which COSCO has recently seen an uptick in volumes.

The shipping giant saw its cargo volume to and from emerging markets, including Southeast Asia, rise by 27% in the first six months of the year, surpassing the growth rate of its U.S. traffic. Wang said COSCO would continue its efforts to diversify its operational risks by expanding non-trans-Pacific routes.

On Thursday, the company announced that its first-half profit fell 97.8% to 40.8 million yuan ($6 million) as it grappled with higher costs and a slide in freight rates.

Revenues rose almost 4% to 45 billion yuan. Container shipping volumes amounted to 11.2 million TEUs, an increase of over 12% year-on-year.

In July, COSCO cleared a major hurdle in its planned $6.3 billion takeover of Hong Kong-based peer, Orient Overseas (International) Ltd., by gaining approval from U.S. authorities.

The deal will increase COSCO’s shipping fleet to around 400 vessels, making it the world’s third-largest, behind Danish conglomerate Maersk Line and Switzerland-based Mediterranean Shipping Co.

Orient Overseas is controlled by the family of Tung Chee-Hwa, Hong Kong’s first post-handover chief executive.

Contact reporter Jason Tan (jasontan@caixin.com)


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