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COSCO says resolved some lease disputes, ship owners hopeful

Aug 28, 2011 2:30:41 PM - www.ft.lk
  • COSCO says vessel seizures common in lease disputes
  • Says confident of resolving contract disputes
  • Only a small number of its 400-plus bulk cargo ships involved
  • Greek co DryShips’ CFO sees payment settlement with COSCO soon
     

HONG KONG/Bangalore (Reuters): China COSCO Holdings Co Ltd.’s President said on Friday the company has resolved lease disputes with ship owners on 18 vessels, and at least two Greece-based ship owners said they hope to reach a settlement soon.
Zhang Liang told a video conference in Hong Kong that COSCO operated more than 400 bulk cargo ships and the contract disputes involved only a small number of vessels.
The country’s top shipping conglomerate has sought better terms for lease contracts signed during the peak of the market in 2008, but its decision to halt payments to several ship owners in recent weeks has threatened to taint its reputation in the international shipping community.
“We have the ability to handle the disputes,” said Zhang from Beijing.
Zhang did not detail how many leased ships had been seized or were under dispute, saying only that the reasons for the disputes were complicated.
“Through negotiation, consultation and communication, currently (we) have reached contract agreements with several partners involving 18 ships,” Zhang said. “This has further strengthened cooperation between COSCO and ship owners and realised a mutually beneficial relationship.”
Ziad Nakhleh, Chief Financial Officer of ship owner DryShips Inc, said the settlement on the 18 ships as claimed by COSCO did not involve any of its vessels. “We are in talks and things are looking good,” he told Reuters by telephone from Greece. “We hope to reach a settlement soon.”
DryShips – which had seized a COSCO ship in Singapore a few weeks ago – is looking at seizing more ships, two Greece-based sources familiar with the matter told Reuters on Wednesday.
George Achniotis, Finance Head of Navios Maritime Holdings Inc and a Director at sister company Navios Maritime Partners LP , said he was confident COSCO would be forced to make the necessary payments as the Navios Group has taken legal steps.
“We are talking to them and I expect we will reach a settlement very soon,” Achniotis told Reuters by phone. “They have to pay up. We don’t have a deadline, but I am confident that the whole (issue) would be settled very soon.”
The Navios Group has four ships chartered to COSCO.
When asked whether COSCO’s image would be dampened by the disputes, Zhang said: “You have to believe our strength, believe our honesty, believe our market principle of mutual benefit.”
Jeremy Penn, Chief Executive of the Baltic Exchange – which publishes the world’s benchmark freight indices – hoped the matter would be resolved amicably.
“At the moment, it is being limited to COSCO and their counterparties, and COSCO has been concerned about the potential effect on them. It would be good news to see it resolved,” he told Reuters on Friday.
COSCO’s news conference on Friday came a day after the company posted a bigger-than-expected first-half net loss of 2.76 billion yuan, compared with a 3.41 billion yuan profit a year earlier, as excessive market supply weighed on freight rates.
China COSCO operates the world’s largest bulk cargo fleet and is the global No.6 container shipping company. It had 234 self-owned dry bulk vessels and 201 chartered-in dry bulk ships with a combined capacity of 3.79 million dead weight tonnes at the end of June.

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