MOL Starts Cutting Its Dry Bulk, Boxship Fleets

Image Courtesy: MOL

Japanese shipping company Mitsui O.S.K. Lines (MOL) is reducing its Capesize fleet by about 10% by cancelling some charter-in contracts and selling some dry bulkers it owns, within its drastic restructuring plan announced in February.

The company said that it has already started returning chartered-in vessels based on agreements with business partners.

In April 2016, MOL is to commence selling its Capesize bulkers that have been deemed as surplus, with the estimated loss of JPY 36.9 bn (USD 330 million).

The move comes as the company recorded a major profit plunge for 2015 amid industry woes plagued by overcapacity.

The company restructured its internal dry bulk business divisions and established the new unit effective April 1st. Under the measures, MOL is to dissolve its subsidiary MOLBC (MOL Bulk Carriers Pte. Ltd.) as of September 2016 and transfer its business operations from Singapore to Tokyo.

As of April, MOL said it would proceed with early cancellation of time charter-in contracts by MOLBC and transferring the charters to the company from MOLBC. MOL predicts an extraordinary loss to be JPY 40.5 bn (approx. USD 360 million) and JPY 30.5 bn (USD 270 million) from the said transactions, respectively. The new dry bulker and coal carrier divisions are to take over MOLBC’s operations.

The early cancellations of Capesize bulker time charter-in contracts completed in March are to incur JPY 9.5 billion loss, MOL said.

The company will record an impairment loss on fixed assets in its container shipping business as it decides to start selling some of its surplus vessels in April, with an estimated loss of JPY 60.7 bn and JPY 1.2 bn, respectively.

According to MOL, the reason for the reforms is a radically different business environment, with the dry bulker and containership freight rate market well below the company’s previous assumption.

As a result of the restructuring steps, the company is bracing to record a consolidated extraordinary loss of JPY 179.3 bn (approx. USD 1.6 bn) in the fourth quarter of this fiscal year, a somewhat reduced amount from the projections in February amounting JPY 180 bn.

By restructuring its dry bulker and containership businesses, MOL says it would develop a business structure that generates stable profit.

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