On the back of the deteriorating conditions in the shipping market, Japan’s Big Three shipping companies, Kawasaki Kisen Kaisha (K Line), Nippon Yusen Kabushiki Kaisha (NYK Line) and Mitsui O.S.K. Lines (MOL), reported losses for the first half of fiscal year 2016 ended September 30.

Of the three majors, K Line reported the largest operating loss during the period, which stood at JPY 26.4 billion, against an operating income of JPY 18.7 billion, as market conditions “were more adverse than previously forecast.”

The shipping line’s net loss stood at JPY 50.4 billion, compared to a net income of JPY 11.6 billion seen in the six-month period in 2015, while its operating revenues decreased to JPY 491.1 billion in the first half of the fiscal year from JPY 668.3 billion reported in the same period a year earlier.

K Line said that, in the containership business, the adversities included a prolonged slump in the freight rate market focused primarily on the Asia-North America service and Asia-Europe service, and, in the car carrier business, a continued slump in demand for transport for emerging countries, particularly resource-rich countries.

As market conditions seem to have bottomed out in some areas in the containership business, demand for marine transport continues to increase slightly in the dry bulk business, but overall, “it is expected to take some time for global improvement in the balance of tonnage supply and demand as well as for a full-fledged recovery in conditions for shipping,” K Line said.

As a result, K Line has revised its full year forecast which now includes a net loss of JPY 94 billion, compared to the previous net loss forecast of JPY 45.5 billion for the period.

The company’s compatriot NYK Line has reported its operating loss at JPY 22.4 billion, against an operating income of JPY 38.6 billion seen in the first half a year earlier.

The shipping line’s net loss for the period stood at JPY 231.8 billion, against a net profit of JPY 54.7 billion reported in the first half of fiscal year 2015, while its revenues dropped to JPY 928.5 billion from JPY 1.19 trillion in the respective periods, reflecting “the slump in the container shipping and dry bulk shipping markets, as well as the result of the group’s reduction of its fleet of dry bulkers,” according to NYK Line.

“Given the lack of a full recovery of the maritime shipping market, management expects results to fall short of profitability,” NYK Line said, adding that it now expects a full year net loss of JPY 245 billion, significantly more than the previously forecast net loss of JPY 15 billion.

Although it posted an operating loss of JPY 2 billion in the first half, against an operating income of JPY 8.1 billion seen a year earlier, MOL was the only one of Japan’s Big Three shipping firms to wrap up the half-year period with a net profit. Namely, unlike its counterparts, MOL reported a net profit of JPY 16 billion in the first half, against a net loss of JPY 0.2 billion seen in the corresponding half of fiscal year 2015.

The company’s revenues, however, decreased to JPY 713.5 billion from JPY 904.6 billion reported in the period from April 1 to September 30, 2015.

“Looking at the maritime shipping market conditions, the dry bulker market continued to experience suppression of market rises despite various factors improving the market,” MOL said, adding that the very large crude oil carrier (VLCC) market continued on a weakening trend due to not only a decline in cargo volume because of the low demand period for crude oil over summer, but also the deterioration of the balance between supply and demand resulting from deliveries of new vessels and suspension of crude oil shipments from Nigeria.

In the containership freight market, although some improvements in the supply and demand environment on Asia-North America, Asia-Europe and Asia-South America routes facilitated a recovery in the spot freight rates, “the market continued to be difficult overall due to significant falls in the one-year contract freight rates,” MOL said.

The shipping firm revised its previous outlook for the full year slashing its earlier net profit forecast of JPY 15 billion to JPY 7 billion.

Earlier today, K Line, NYK Line and MOL said that they are planning to establish a new joint-venture company to integrate their container shipping businesses, which would also include worldwide terminal operating businesses excluding Japan.

Expected to be established on July 1, 2017, the new joint-venture company would operate a fleet totaling 1.4 million TEUs.

World Maritime News Staff