Due to the persistent weakness in freight rates, Japan’s big three shipping companies Nippon Yusen Kabushiki Kaisha (NYK Line), Kawasaki Kisen Kaisha (K Line) and Mitsui O.S.K. Lines (MOL) lowered their full year outlook as they posted first quarter earnings.
Nippon Yusen Kaisha (NYK) suffered the worst hit as the company reported a loss of JPY 12.78 billion (USD 123.1 million) in the first quarter, compared to a profit of JPY 43.06 billion seen in the same period a year earlier.
NYK’s revenue decreased to JPY 470.7 billion in the quarter, from JPY 588.7 billion a year earlier, while its operation income plunged from JPY 17.4 billion to an operating loss of JPY 10.9 billion for the respective periods.
The company estimated that its full year loss would reach JPY 15 billion, against the previously estimated profit of JPY 15 billion.
NYK said that the container shipping market was extremely sluggish as growth in freight rates stalled due to an oversupply of tonnage, while the dry bulk shipping market also witnessed challenging operating conditions “as the lingering gap between supply and demand did not narrow significantly despite the scrapping of aging vessels.”
Oversupply of all types of vessels grew markedly worse in the liquid transport market as a result of new deliveries of ships, NYK added.
The company’s compatriot Kawasaki Kisen Kaisha (K Line) also closed the first quarter in the red. Namely, K Line reported a loss of JPY 26.79 billion (USD 258.2 million), against a profit of JPY 10.1 billion seen in the same period in 2015.
The company’s revenues for the three-month period stood at JPY 244.59 billion, down from JPY 335.45 billion, in part attributed to low levels of dry bulk freight rates and a slumping containership freight rate market in its Asia-North America service.
Furthermore, K Line’s operating income dropped from JPY 11.2 billion to an operating loss of JPY 14.8 billion.
Unlike its counterparts, Mitsui O.S.K. Lines (MOL) posted a profitable first quarter as it recorded a profit of JPY 1.4 billion in the period, down from JPY 12.8 billion seen in the same quarter a year earlier.
The company’s revenues for the period stood at JPY 360 billion, against the JPY 449.4 billion reported in the first quarter of the previous fiscal year.
MOL said that the very large crude carrier (VLCC) market saw an upward pressure from time to time, but the decrease in cargo volume from the seasonal drop off in demand led to the market following a weakening trend since the beginning of the year.
Although the improvements in the supply and demand environment on Asia-Europe and Asia-South America routes facilitated a recovery in the containership sport freight rates, the market continued to be difficult overall, MOL added.
The shipping line predicts that its profit for the fiscal year ending March 31, 2017 will reach JPY 15 billion.
World Maritime News Staff