Report: K Line to Slash Smaller Bulker Fleet by Half

Japanese shipping company Kawasaki Kisen Kaisha Ltd ( “K” Line) will cut in half its fleet of smaller bulkers within its restructuring measures, Bloomberg reports citing an unnamed source familiar with the matter.

As disclosed, the cuts would be carried out by returning of ships to their owners and “K” Line is reportedly willing to pay breakup fees for returning vessels early.

The move is being taken as a response to worsening conditions in the shipping industry, especaily in dry bulk business, which have prompted “K” Line to downgrade its forecast of consolidated financial results for fiscal year ending March 2016 as the company expects to log JPY 50bn loss (USD 445 million) against JPY 5 bn profit announced in January.

The downgrade is assigned to the losses arising from the company’s structural reform in dry bulk business, plus additional loss on valuation of investment securities.

As a result, the company has decided to speed up its fleet rationalization, mainly relating to small and medium-size vessels to reduce the exposure to risks from market conditions.

“We estimate roughly 50 billion yen of losses for this purpose, consisting of additional disposal of some of our own fleet, early termination of charter agreements, impairment loss of some of our dry bulk vessels, and so on,” the company said early April.

“K” Line is not the only one rushing to cut its losses by getting rid of surplus bulker fleet. Namely, the company’s compatriot 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.

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

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

Due to 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.

World Maritime News Staff

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