Monday, August 1, 2011

Japanese Container And Bulk Freight Carriers Predict Downturn

Forecasts Slashed as Profits Fall
Shipping News Feature

JAPAN – WORLDWIDE – Rates for all types of cargo are liable to be forced lower as competition mounts in a time of falling traffic levels according to analysts viewing recent reports from the big Japanese carriers. Despite spreading the risk by offering a wide range of cargo services, ocean shipping companies like Mitsui OSK Lines (MOL) expect a drop in demand for car carrying, bulk tanker tonnage and particularly container freight over the coming months.

Last week MOL and Nippon Yusen Kaisha (NYK) admitted forecasts were too optimistic in the face of reduced consumer spending and rising fuel costs with MOL cutting its net income forecast for the first six months of 2011 (to 30th September) from 10 billion Yen to just a million, a fall of 90%, and for the year overall to 31st March 2012 to 17 billion Yen ($220 million) from 30 billion($387 million), a 43% drop. Meanwhile NYK is anticipating a fall of around 85% against their own predictions meaning a final net income of 5 billion Yen ($64 million) to the end of March.

With the bulk sector in the doldrums, what MOL refers to as ‘the current downturn’ (although the Baltic Dry Index hasn’t exceeded 2000 this year so far) car sales overall slowing, the excessive fuel costs of the last few months, plus the paucity of container freight in a market which has seen numerous new builds coming on stream this past year leading to potential overcapacity, a reduction in profits for Japans two biggest ocean carriers was only to be expected. What will be interesting to observers, with or without vested interests, will be the extent to which freight rates can be maintained within the various sectors.

Photo: Stormy times ahead. A section of ‘The Gale’ by Willem van de Velde II.