SEO Version
16
COSCO Corporation (Singapore) Limited
MESSAGE FROM
THE CHAIRMAN
In an update on its World Economic Outlook in
January 2014,the International Monetary Fund (IMF)
projected higher global economic growth of 3.7%
for 2014 and 3.9% for 2015. However, it said that the
world economy was “not yet out of the woods” and
therewere still downside risks, including lower-than-
expected inflation in the advanced economies and
the need to manage potential capital flow reversals
in the emerging and developing economies in light
of recent developments.
Generally, further acceleration in world economic
growth is expected to be driven by advanced
economies. The outlook for emerging markets such
as China and India has been described as mixed
despite some changes in their momentum.
Thus, we are concerned whether growth could
stabilise further with improvements in more
countries or is it just tentative,as the over-capacity in
the shipping market badly needs a sustained boost
from increased trade. The World Trade Organisation
(WTO) had said in September 2013 that world trade
growth in 2014 would likely be 4.5%, higher than
the growth of 2.5% in 2013.
In this improving market scenario, there are still
concerns about the impact of the winding down
of financial stimulus measures in the advanced
economies, the strength of the Chinese Yuan
against the US Dollar, higher financing costs and
the escalation of raw material and labour costs,
which can bring great pressure to the Group’s
performance going forward.
Overall, the Company maintains a cautious outlook
as it expects business and operating conditions to
remain difficult and challenging in 2014 amidst very
uncertain global economic growth prospects.
STAYING THE COURSE, AND LEVELLING UP
While the market seems to be improving, we are
mindful that prices of newbuilds for dry bulk and other
transport vessels had seen sustaineddecline since 2009
and we have to be realistic that prices might not return
to the pre-2008 level in the short-term. According to
statistics from Clarkson Research Services Ltd, dry
bulk carrier newbuild prices increased slightly in
2013 compared with 2012, but given the fact that
the oversupply situation continues to persist, prices
might not improve significantly in 2014. Contracts
secured over the last two to three years had been at
progressively lower prices, with many of them due
for delivery over the next two years.
We are also concerned that the surplus yard capacity
in China over the last few years has driven more
players into the offshore marine market, an area
where we have diversified into some seven years
earlier.
Although the offshore marine market has been
stable so far, it can be expected to remain highly
competitive in the product areas where we have
built our capability. However, we have been building
on our strength in some offshore product segments
and made breakthroughs into new product areas as
well.
Meanwhile, we have received re-orders for several
ultra deep-water cylindrical drilling rigs and jack-
up drilling rigs, as well as a new order for a semi-
submersible tender assist drilling rig that will be the
most modern of its kind when completed.
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