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COSCO Corporation (Singapore) Limited
areas and are expected to have material and
adverse impacts on the performance and financial
condition of the Group if they are not pre-empted
appropriately.
COMPETITION
The ship building, ship repair, offshore marine
engineering and dry bulk shipping industries
are highly competitive. The primary bases for
competition in the ship repair, ship building and
offshore marine engineering industries are matching
of the customers’ demands with the capabilities
and capacity of a shipyard, the type and quality of
vessel, price, delivery schedule/availability and type
of equipment.
The Group expects to face increased competition
from existing competitors and new entrants into
these industries in the future. In the event that the
Group is unable to continually upgrade its shipyard
capabilities, the Group’s business, financial condition,
results of operation and prospect may be adversely
affected.
Being a relatively new entrant in the offshore marine
engineering industry, the Group expects to incur
higher costs during execution of offshore marine
engineering projects on new product types. The
Group may face stiff competition, especially under
this era of global uncertainties whereby some
players have adopted aggressive pricing strategy in
order to secure new orders.
Increased competition in the markets have caused
contract values of new ship building contracts to
deteriorate and these poised adverse impact to the
Group’s performance and financial condition.
CUSTOMER DEMAND
Customer demand for the Group’s services and
expertise is expected to increase to a higher level
of expectation. The Group expects greater scrutiny
by customers before they take delivery of vessels.
This will, inadvertently, increase the cost of building
the vessel. A failure to recover higher costs could
materially and adversely impact the Group’s
performance.
The Group has introduced enhanced modern
shipbuilding management system software to better
manage and to mitigate the risks of late ship-built
delivery and quality. A“COSCO Shipyard CIMS System
Maintenance and Operation Regulation” has been
developed and updated to ensure common practices,
smooth and stable operation throughout the various
shipyard subsidiaries.
The Group is also exposed to counterparty risk from
customers that could result in financial losses should
those counterparties become unable to meet their
obligations to the Group.
FLUCTUATIONS IN THE BALTIC DRY INDEX (“BDI”)
The BDI is a benchmark of the dry bulk shipping
industry and is an indication of the price of moving
major raw materials by sea. It is generally recognised
as an economic indicator of the movement of the
volume of global trade.
An increase in the BDI is generally considered to
indicate an increase in demand for dry bulk shipping,
whereas a decrease in the BDI is generally considered
to indicate a decrease in demand for dry bulk
shipping, and the capital expenditures of dry bulk
shipping companies are usually driven mainly by the
BDI outlook.
For recent years, the dry bulk shipping index has
recorded historical low as the shipping industry is
experiencing excess capacity leading to lower charter
rates.The fluctuations in the BDI result in an uncertain
outlook for the dry bulk shipping industry, which
typically has an impact on vessel owners’ willingness
to place new orders for bulk carrier vessels, which in
turn affects the Group’s services and products.
RAWMATERIALS
The Group depends upon the availability, quality
and cost of steel and steel-plates from around the
world, which exposes it to price, quality and supply
fluctuations. Although the Group will take measures
to protect against the short-term impacts of these
fluctuations and of the concentration of supply, there
is no guarantee that these will be effective. A failure
RISK
MANAGEMENT
Corporate Gover nance and Transparency
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