China Cosco Holdings Co, the world's largest operator of dry-bulk ships, has canceled a $299 million order for eight vessels as the global recession and overcapacity sap rates.

The Hong Kong-listed shipping line will also delay delivery of three other vessels to be built by affiliate Cosco Corp Singapore Ltd, according to statements Wednesday night from the companies, both members of the country's largest shipping group. All of the vessels have a capacity of 57,000 deadweight tons each.

China Cosco chairman Wei Jiafu said in April that the company planned to delay or cancel new vessels after slowing demand for iron ore and rising overcapacity in the global fleet caused rates to plunge and a first-quarter loss. The move raises Cosco Singapore's cancellations since October to at least 13 and increases its number of delays to at least 29.

The three delayed China Cosco vessels, previously due last year, will now be delivered by the end of October, Cosco Singapore said. The shipyard's order book totaled $7 billion at the end of March with deliveries stretching into the first half of 2012, it said on May 7.

The company said on July 10 it had received requests from two European shipowners to delay deliveries of eight bulk carriers.

Shipping lines have postponed or canceled vessels because of a drop in rates. The Baltic Dry Index, which tracks commodity-cargo fees, has plunged 63 percent over the past year.

Shipyards in on the mainland, the world's second-largest shipbuilding nation, had 152 orders axed in the eight months to May and may face more cancellations, the China Association of Shipbuilding Industry said on July 6. Worldwide, shipyards have orders for bulk vessels with a combined capacity equal to 66 percent of the existing global fleet, according to data compiled by Bloomberg.

China Cosco had a fleet of 443 dry-bulk vessels at the end of December, with another 58 on order, according to an April 22 statement. It also operated 141 container vessels and had a backlog for 59 more. The company was attempting to delay three of nine new container ships due to arrive this year to 2010, it said at the time.

Cosco Singapore operates shipyards in the mainland cities of Dalian, Nantong, Shanghai, Zhoushan and Guangzhou. It began receiving orders to build bulk carriers in January 2007 after acquiring Cosco Shipyard Group from parent China Ocean Shipping (Group) Co two years earlier. It delivered its first vessel in April.

Bloomberg News

(HK Edition 07/17/2009 page3)