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China Shipping Container Lines Co., Ltd. (CSCL), has reported a 44 percent drop in profit for the first half of the year due to a fall in demand and surging fuel costs.

The second largest box line in China recorded a profit of 637.2 million yuan (US$102 million) for the first six months, despite revenue growth of just over 5 percent to 18.4 billion yuan (US$2.7 million).

CSCL recorded turnover at 18.231 billion yuan (US$ 2.67 billion) for the six months ended 30 June 2008, up 4.8 percent as compared with the same period in 2007. Loaded container volume reached 3.57 million TEUs, 7.3 percent higher than that in the last corresponding period.

However, the company said a fall in demand in US and European trades had caused the fall in profit. Transpacific trade recorded the largest drop in income with revenues dropping 17 percent to 5.7 billion yuan and trade volume falling 12 percent to 680,000 TEU.

Volume on the Asia-Europe trade also decreased, falling from 716,000 TEU to 701,00 TEU, a drop of 2 percent. However, trade revenue still rose by 10.8 percent to 6 billion yuan.

Commenting on the results, the CSCL said "Having triumphed over the negative impacts from the shipping industry downturn and the macroeconomic environment, CSCL managed to achieve steady business development with our Asia Pacific and China Domestic routes, thus reporting satisfactory overall results in the first half of 2008. On top of that, through exercising stringent cost control measures, we managed to minimize impact of surging operating and fuel costs on our operations.”

CSCL's operating costs had increased as a result of the deployment of new shipping capacity and surging fuel costs. The company said it had implemented a series of measures to control its marine fuel consumption and, as a result, its oil consumption rate was down by 108,000 tonnes and oil consumption of average revenue per TEU dropped by 15 percent compared with the previous corresponding period.

The Group also reportedly saved US$9.48 million in fuel expenses due to the bulk purchase of fuels at discounted prices, thus minimizing the effect of soaring fuel costs.

Looking ahead, the company said it will continue to strengthen its fleet and shipping capacity to prepare for the industry traditional peak season in the second half of the year and also the future cyclical upturn.

CSCL said it was fully prepared for the upturn of the shipping cycle, and had expanded and optimized its fleet in the first half of the year. In the six months ended 30th June 2008, the company added shipping capacity in equivalent to 5,991 TEUs increasing the total to 452,000 TEUs, of which 82.8% were large container vessels of capacity over 4,000 TEUs.

In addition to an order with Samsung Heavy Industries Company Limited for eight large container vessels of total capacity of 13,300 TEUs, CSCL acquired and ordered 13 vessels from China Shipping Development and China State Shipbuilding Corporation in the first half year to boost the size of its fleet.

The company said it will also actively adjust the shipping capacity allocation by devoting more shipping capacity to routes with good performance and make timely adjustment based on changes in demand for domestic and international routes.