Market conditions put pressure on NYK, MOL, K-Line

1st-NYK, MOL, K-Line

The challenging market conditions in the container shipping industry continued to add pressure to Japan’s three major shipping companies, leading to more losses in the first nine months of fiscal year 2016 ended December 31.

Of the three major shipping lines, Nippon Yusen Kabushiki Kaisha (NYK Line) reported the largest net loss for the nine-month period which amounted to JPY 226 billion (USD 1.98 billion), compared to a net profit of JPY 22.8 billion seen in the same period a year earlier. The result was largely due to an extraordinary loss of some JPY 200 billion comprised of an impairment loss and provision for losses related to contracts associated with container ships and dry bulkers.

The shipping firm’s operating loss for the period stood at JPY 15.5 billion, compared to an operating income of JPY 47.1 billion seen in the nine-month period of 2015, while its revenue dropped by 19.9 percent to JPY 1.4 trillion from JPY 1.76 trillion in the respective periods.

In the global shipping industry, spot freight rates rebounded in the container shipping market, however, the gap between supply and demand continued to widen as the steady production of new ultra-large container ships contributed to an oversupply of tonnage, NYK Line said, adding that, consequently, the market “is not projected to fully recover in the near future.”

In the dry bulk shipping market, which has been undergoing an unprecedented slump, market conditions appeared to pick up from the beginning of autumn, largely due to increased volume of Chinese imports of coal and iron ore. Nevertheless, a full-fledged market recovery is expected to take time, according to NYK Line.

Although it revised its full-year forecast, which now includes revenues of JPY 1.9 trillion and an operating loss of JPY 17.5 billion, NYK Line confirmed that it still expects to end the fiscal year with a net loss of JPY 245 billion.

The company’s compatriot shipping line, Kawasaki Kisen Kaisha (K Line) concluded the nine-month period with a net loss of JPY 54.5 billion (USD 478.5 million), compared to a net income of JPY 9.2 billion seen in the same period a year earlier.  The loss was mainly attributed by low freight rate based on the vessel supply-demand gap in the containership business, despite signs of a revenue pickup, such as improvement in the short-term freight market, particularly on East-West services.

K Line’s operating loss for the first nine months reached JPY 34.6 billion, against an operating income of JPY 15.19 billion reported in the previous year, while its revenue decreased to JPY 760.9 billion from JPY 977.7 billion in the respective periods.

The company’s revised outlook for the fiscal year 2016 shows that K Line expects its net loss to remain at JPY 94 billion, while its operating loss forecast was lowered to JPY 43 billion and revenues are forecast to reach JPY 1 trillion.

The final of Japan’s three major shipping lines Mitsui O.S.K. Lines (MOL) continued its earnings streak despite an operating loss of JPY 2 billion. Namely, the company ended the nine-month period with a net profit of JPY 19 billion (USD 166.8 million), up from JPY 13.2 billion reported in the same period a year earlier.

MOL’s revenue however dropped to JPY 1.08 trillion from JPY 1.3 trillion seen in the first nine months of the previous fiscal year.

Although some improvements in the supply and demand environment on Asia-North America, Asia-Europe and Asia-South America routes facilitated a recovery in the spot freight rates, “the market continued to be difficult overall due to significant falls in the one-year contract freight rates at the beginning of the fiscal year,” MOL said.

The shipping firm revised its outlook for fiscal year 2016, completely slashing its earlier net profit forecast of JPY 7 billion. Although the revenue is expected to experience a slight rise and the operating loss would be cut to JPY 8 billion, the company expects to break even.

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