21
Annual Report 2014
Key Messages
recovered steadily in 2013 and reached a high of 960
points in mid-2014 before ending at 939 in December
2014.
Going forward, the market for newbuilds is expected to
be lacklustre, but we expect to see a resilient market for
dual-fuel eco-friendly ships, LNG carriers and special
purpose vessels with higher specifications.
With the highly volatile global market conditions,
prices may not recover any time soon. We foresee
near-term price weakness in the face of the global
tonnage surplus that has grown with a younger fleet.
This is expected to curtail appetite for investment in
newbuilds. Furthermore, we are very concerned about
credit availability from cautious lenders to the maritime
industry.
We will endeavour to innovate and pursue higher quality
contracts. Over the years, we have extended our ship
building capability for an increasingly wider range of
vessels, in addition to bulk carriers.
Against the backdrop of tonnage overcapacity, younger
global fleet and lower repair prices, we believe the ship
repair and conversion market may still face pressures.
However, opportunities may present themselves as
many ship owners with older fleets are likely to allocate
higher budgets for repair, with the increased cash flow
resulting from lower oil prices and operating costs.
There should also be additional opportunities after the
enactment of the more stringent International Maritime
Organisation Convention amendments.
In 2014, our shipyards in Dalian, Guangdong and
Zhoushan were included in the ‘white list’ published by
the Ministry of Industry and Information Technology of
the People’s Republic of China. This is in recognition
of the overall building quality and management
competency of our yards. This may help our yards
to receive favourable policy support and gain easier
access to loans especially from state-owned banks.
6. What is the Company doing to sustain its
performance in 2015?
Our wide-ranging capabilities have been a key factor in
our sustained performance since 2006, when we started
our marine engineering business. With our six shipyards
in China each well-equipped to handle projects of
various dimensions, we have the added flexibility that
most other shipyards lack in addressing changing market
requirements.
COSCO has grown into an integrated marine engineering
solutions provider with the capability for projects
spanning the maritime value chain. COSCO Corporation
is one of the leading marine engineering groups in the
People’s Republic of China.
We are moving up the value chain of more sophisticated,
higher-value semi-submersible drilling rigs and sub-
sea supply vessels. This will help us continue to build a
stronger foundation for this core segment of our business.
Having said that, we need to be mindful of the trade-offs
between building higher value complex product types
and the resulting cost and execution challenges.
We have come a long way to build a formidable pool of
resources and expertise for numerous projects, especially
at the mid to higher end of the value spectrum. Our recent
landmark deal with Maersk Supply Service to construct
four sub-sea supply vessels is a vote of confidence in the
technical capability that we have honed over the years.
We believe opportunities still exist in the current difficult
market and we will have to work much harder. Today, we
are in a better position to take advantage of opportunities
when the market recovers – for both marine engineering
and shipbuilding segments.
Pressing forward, we are guided by some good practices
to see us through this difficult time. They include
but are not limited to the following: pursue strategic
and transformation goals, pro-actively engage major
clients and capitalise on market opportunities; step
up productivity to ensure on-time delivery of projects,
control costs to enhance competitiveness; adopt Lean
Management practices to improve efficiency and quality;
promote innovation, augment and upgrade technical
competencies; and manage risks with an eye on business
sustainability.
