Cosco Group Chairman Wei Jiafu Steps Down as China’s largest state-owned shipping company struggles to return to profitability

July 2, 2013, 3:01 a.m. ET

Cosco Group Chairman Wei Jiafu Steps Down

‘Captain Wei’ to Be Replaced by Cosco President Ma Zehua

JOANNE CHIU

HONG KONG—The head of China’s largest state-owned shipping company has stepped down in a shake-up of senior management at a time when its listed flagship,China Cosco Holdings Ltd., 601919.SH -0.33% is struggling to return to profitability. The arm of the Communist Party that controls personnel matters and top-level appointments said Monday that Wei Jiafu, chairman and party secretary for China Ocean Shipping (Group) Co., or Cosco Group, will leave the company immediately, among other senior-level management changes.The Organization Department appointed Cosco President Ma Zehua, 60, as the group’s new chairman and party secretary, while Executive Vice President Li Yunpeng will succeed Mr. Ma as president.

The 63-year-old Mr. Wei, who was widely believed to be nearing the end of his career, already exceeded the standard retirement age of 60 for state-owned firms.

Cosco Group’s Hong Kong and Shanghai-listed flagship is contending with industry overcapacity and softening demand for trade that has depressed freight rates. Compounded by expensive long-term ship charter contracts signed during the height of the commodities boom, Cosco posted two straight years of losses, making it the worst-performing A-share-listed company in 2011 and 2012.

Captain Wei, as he likes to be called, has been at the helm of Cosco Group since 1998. A former ship captain who once was held hostage by pirates, he steered Cosco Group through some of its toughest times in its over 52-year history when the global financial crisis hit in late 2008.

Analysts say Mr. Wei’s departure won’t have a major impact on the strategy of the shipping company, whose main role is to facilitate trade between the nation and the rest of the world.

His successor, however, will be tasked with turning around China Cosco, which is on the verge of being delisted from the Shanghai Stock Exchange if the company posts losses again this year.

To avoid a third straight year of loss, China Cosco’s 43%-owned port operating unitCosco Pacific Ltd. 1199.HK -0.40% in May announced a plan to sell its entire 21.8% stake in a container maker back to its to its ultimate parent: Cosco Group. In March, China Cosco sold its logistics business in a $1.1 billion deal to Cosco Group. One-off gains from the two deals would likely improve China Cosco’s profitability, but they may not be enough to turn the company around this year as shipping rates remain under pressure because of capacity oversupply and weak demand, particularly in the bulk shipping sector.

Mr. Wei, who is also chairman of the Hong Kong and Shanghai-listed China Cosco, will likely step down from the post at the listed unit following a board meeting, which hasn’t been scheduled.

Cosco Group is also the parent of Cosco Pacific Ltd. and Singapore-listed Cosco Corp..