News Content

Low freight rates drag Japanese carriers deeper into the red

IN segments described as liner or containership operations, Japan's three major shipping companies - Nippon Yusen Kabushiki Kaisha (NYK Line), Mitsui O S K Lines, Ltd (MOL), and Kawasaki Kisen Kaisha, Ltd ("K" Line) - have reported a combined loss of JPY77 billion (US$691 million) for the fiscal year ending March 31, 2017, due to historically low freight rates.

In the prior fiscal year, the companies collectively loss JPT40.1 billion.

The container operations of each company are part of larger, diversified companies with operations in many other segments of the shipping and transportation businesses.

For overall operations, NYK and "K" Line posted fiscal year losses, while MOL turned a profit, and all three carriers reported a decline in total revenues, reported American Shipper.

While they operate separately today, the three carriers plan to merge their container operations in April 2018. At the beginning of this April, they began operating together with Hapag-Lloyd of Germany and Yang Ming of Taiwan under their new east-west vessel sharing agreement, dubbed "THE" Alliance.

NYK, Japan's largest shipping company, reported a loss attributable to owners of the parent company of JPY265.7 billion for the fiscal year, compared to a profit of JPY18.2 billion the prior fiscal year.

MOL's overall operations had a profit attributable to owners of the parent company of JPY5.2 billion for the fiscal year, compared to a loss of JPY170 billion a year earlier.

Operating profit improved to JPY2.6 billion while revenues fell to JPY1.5 trillion, compared to the prior fiscal year's operating profit of JPY2.3 billion on revenues of JPY1.7 trillion.

MOL's container business reported a loss of JPY32.8 billion, a larger loss than the JPY29.8 billion loss a year prior. "The considerable decline in one-year contract freight rates at the beginning of the fiscal year, notably on the Asia-North America routes, due to the impact of stagnation in the spot freight rate in the previous fiscal year weighed on the containership segment throughout the period," MOL said.

The shipping line also said that during the fiscal year, it made efforts to lower vessel costs through business structural reforms, boost capacity utilisation rates through stronger sales capabilities, and cut operation costs by continuously lowering the expenses of positioning empty containers through improved yield management. "As a result, from the third quarter onward, the division's ordinary loss improved year on year, but ordinary loss for the full year slightly increased year on year," the carrier explained.

"K" Line said it had a loss attributable to owners of JPY139.5 billion for the fiscal year, compared to a loss of JPY51.5 billion the prior fiscal year.

The carrier's operating loss for the fiscal year totalled JPY46 billion, compared with an operating profit of JPY9.4 billion a year earlier, while revenues fell to JPY1.03 trillion, down from JPY1.24 trillion the prior year.

In its container business, "K" Line recorded a larger loss and a decline in revenues, posting a loss of JPY31.5 billion and revenues of JPY519 billion, compared to a loss of JPY10 billion and revenues of JPY614.9 billion a year earlier.

"Although the freight rate market turned favourable in the final stretch of the fiscal year, reflecting steady cargo movements, the gap between vessel supply and demand is yet to be fixed and reduced revenues year on year led to a loss larger than the previous year," the carrier said.

In its logistics business, including inland transportation and warehousing, "K" Line said demand for domestic logistics services was somewhat weak compared to the previous year. Although international logistics services performed strongly, with an increase in transport demand for air cargo from Japan, the logistics business overall recorded year-on-year decreases in both profit and revenues.