SHIPPING GIANT TO STRAND: A COSCO container ship arrives at Hong Kong on February 26 (JIANG KEHONG)

China COSCO Holdings Co., the world's second largest shipping company by fleet size which owns the world's biggest bulk cargo fleet, saw its losses in the first half of the year expand to 4.87 billion yuan ($769.5 million) amid an industry downturn, according to its filing on the Shanghai Stock Exchange on August 30.

The state-controlled shipping giant, whose businesses include container and dry bulk shipping and port operations, posted a deficit of 2.7 billion yuan ($426.6 million) during the same period of 2011. For 2011, it incurred losses of 10.45 billion yuan ($1.65 billion), making it the biggest loser on the A-share market.

However, the worst is yet to come. Analysts expect COSCO to stay in the red for the second year in a row in 2012, with few signs of a recovery in the global shipping market.

According to rules of the Shanghai Stock Exchange, if a company reports losses for two straight years, its shares will be listed as ST (special treatment) stock or junk shares. If the company continues to incur losses for a third consecutive year, it could face the risk of delisting from the bourse.

Immediately following the announcement of its first-half results, COSCO's Shanghai-listed shares tumbled 1.24 percent and its shares on the Hong Kong bourse dropped 3.49 percent.

Industry-wide losses

COSCO is not the only industry player suffering from the severe downturn.

Amongst 13 A-share listed Chinese shipping companies, only four have been profitable for the first half of 2012. Those 13 companies registered total losses of 7.8 billion yuan ($1.23 billion), with the losses expanding by 181 percent year on year.

China Shipping Development Co. Ltd. saw 495 million yuan ($78.36 million) in losses in the first half of 2012, compared with its 684-million-yuan ($108.28-million) profits in the same period last year.

China Shipping Container Lines Co., another major shipping company, also posted its half-year financial report on August 30. Its net losses expanded to 1.28 billion yuan ($202.6 million) in the first half, nearly double the losses during the same period a year ago.

China Merchants Holdings International Co., an investor in ports moving about a third of the nation's containers, reported a 32-percent drop in recurring profit in the first half of 2012 because of lower earnings at a cargo-box making affiliate.

Shipping companies will continue to struggle with the slowing global economy, weakened demand and high fuel costs, according to COSCO's statement to the Shanghai Stock Exchange.

So far there is still no clear sign that the shipping sector will improve soon, and shipping companies may see further losses in the second half of the year, said Zhou Liwei, an expert at the China Classification Society, in an interview with Global Times.

"The international shipping sector will continue to suffer as demand for commodities further slackens amid a global economic downturn," Zhou said.

The global shipping industry, often seen as a barometer of the health of the world economy, received a heavy blow from recent global economic woes. COSCO's problems are part of a broader industry shakeout that has been exacerbated by China's rise as a global shipping power.