China Cosco to Buy Largest Dry-Bulk Fleet on Trade

China Cosco Holdings Co. will buy the world's largest fleet of dry-bulk ships from its parent for 34.6 billion yuan ($4.6 billion) because of China's rising imports of iron ore and other raw materials.

The shipping line will buy 412 vessels, it said in a statement to Hong Kong's stock exchange today. China Cosco will sell 864.3 million Shanghai-listed A-shares to its parent for 16 billion yuan to help pay for the purchase. The shares will be sold at 18.49 yuan each, or 15 percent less than the closing price on July 25, before the stock was suspended.

Dry-bulk shipping rates have doubled during the past year fueled by China's surging imports of iron ore and other raw materials. China Cosco raised 15.1 billion yuan in a Shanghai share sale in June to buy ships and a stake in a logistic company from its parent.

"The dry-bulk market will remain strong for the remainder of this year and into next year," said Jack Xu, an analyst at SinoPac Securities. "Shipyards are pretty busy right now and their order books are full, so we don't expect any significant increase in capacity at least for this year."
Share Sale

China Cosco, Asia's largest container shipping line, will also seek government approval to sell as many as 432.7 million new A shares to as many as 10 institutional investors, it said, without identifying the potential buyers. The share sale would be worth 9.39 billion yuan, based on the closing price of the company's Shanghai-traded stock yesterday. It will also borrow money and use internal resources to pay for the ships.

The dry-bulk ships have a combined capacity of 32.02 million deadweight tons, China Cosco, a unit of China Ocean Shipping (Group) Co., said in the statement. The vessels are either owned by units being bought by China Cosco, based in the eastern city of Tianjin, or are on long-term charters. The units also have another 46 vessels on order, according to the statement.

China Cosco's Hong Kong-listed shares were suspended this morning and will resume trading this afternoon at 2:30 p.m. They have more than quadrupled this year, climbing 4.4 percent to HK$19.02 yesterday.

The Baltic Dry Index, a measure of chartering rates for different sized vessels, gained 1.1 percent yesterday to a record 7,783.