COSCO considers asset sale

China COSCO Holdings Co, operator of the world's largest bulk cargo fleet, is mulling plans to sell its logistics unit, China COSCO Logistics Co, according to a statement it filed late Monday with the Shanghai Stock Exchange (SSE), a move which it says is aimed at preventing its Shanghai-listed A-shares from being suspended from trading.

COSCO's plan remains under discussion, according to its statement, although the company's State-owned parent, China Ocean Shipping (Group) Company, was identified as the likely buyer. No time frame or price details were provided.

The shipping conglomerate has struggled to stay afloat in recent years as dismal conditions at home and abroad cut into demand for dry bulk shipping, Zhang Yongfeng, deputy director of the shipping research office at the Shanghai International Shipping Institute, told the Global Times.

The Baltic Dry Index, a benchmark of freight prices on dry bulk commodities like grain, iron ore and coal, came in at 847 Monday, well below the historic peak of 11,793 recorded in May 2008.

After writing down a net deficit of 10.4 billion yuan ($1.67 billion) in 2011, COSCO predicted on January 25 that it would register a second consecutive net loss for 2012, a development which could see it A-shares come under a delisting risk warning (*ST).

China COSCO had already slid into a net deficit of 4.87 billion yuan in the first half of 2012, up 81.48 percent year-on-year, with most of the losses coming from its container and dry bulk shipping operations, according to the financial report it offered on August 29.

If China COSCO extends its losses into a third straight year over 2013, its yuan-denominated shares would be subject to a trading suspension, with delisting possibly to follow soon thereafter, according to regulations from the SSE.

"This would mark China's first delisting of a State-owned firm," Zhang Qi, an analyst at Zero2IPO Research Center, told the Global Times.

But if COSCO finds a buyer for its logistics unit though, this may help it shore up its shaky accounts and turn a profit for this year, reducing the chances of its removal from trading, Zhang explained.

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