China International Marine Containers (Group) Co Ltd (CIMC), the world's largest container producer, said yesterday its main business, dry cargo container manufacturing, has entered into the low season earlier than usual, underscoring that the global economic slowdown is hurting local container demand.
Industrial experts said the slowdown will continue for months, which will probably propel CIMC to shift its focus to its non-core business to maintain a sustainable development.
In a statement, CIMC said dry cargo container manufacturing is a "seasonal" business, and the "first and the fourth quarter" are traditionally the low time.
However, "thanks to the global financial tsunami and the diving Chinese exports as a result, the low season comes much earlier", it said.
The statement comes on the heels of some media reports late last week that CIMC has stopped producing dry cargo containers for two months and about 22,000 employees have been asked to leave for holiday due to the slackening business. Trading of its shares was suspended last Friday.
CIMC owns about 55 percent of the global container market and seems to be bearing the brunt of the country's slowing exports.
During the January-October period, the growth rate of Chinese exports was 21.9 percent year-on-year, and it was forecast to be merely 9 percent for the whole year, compared with last year's 25.7 percent.
During the January-September period, CIMC's container sales were more than 1.5 million TEUs (twenty-foot equivalent units), down by 6.89 percent year-on-year. In the third quarter alone, the figure fell by 22.4 percent year-on-year to 461,800.
The dry cargo container manufacturing division, CIMC's core business, generated 46 percent of the company's sales in the first three quarters, down from 51 percent in 2007.
"The business has not bottomed out, and will not be recovering until late next year," said Guo Yaling, analyst from CITIC Securities Co Ltd.
CIMC has been trying to transform itself into a diverse entity.
Since 2004, the company has made a number of acquisitions and entered the road transportation vehicle manufacturing sector, which now is CIMC's second largest business, producing 19.29 percent of its sales last year.
In June it strengthened its clean energy service, its third largest business, by acquiring 60 percent of TGE Gas Investment SA with 20 million euros.
In 2007, the non-container business accounted for 30 percent of CIMC's sales. "This part will go up gradually," said Guo.
"But container can never be replaced as the core business."
(China Daily December 9, 2008)
