Abstract
NYK Line, Mitsui OSK Lines (MOL), and K Line each released severely depressed
financial results for
the third quarter of FY08, and were expecting even
worse results for the year-end. The global economic
downturn has had a
marked effect on the operations of these three shipping giants, and the
companies will
be looking to minimise losses as they head into 2009. NYK
is Japan' s largest shipping line by revenue.
The group registered a 50%
slump in net profit during the third quarter ending December 2008 to
US$211mn, compared to US$425mn during the same period of 2007. Revenue fell by
10% over the
period, from US$7.57bn in the third quarter of fiscal 2007 to
the latest figure of US$6.84bn. In a press
release, NYK stated that its
weak results were a result of declining trade volumes and dramatic falls
in
container and bulk shipping rates. MOL is Japan' s second largest
shipping line, and its fiscal third quarter
results mirrored the dismal
performance of NYK. The liner' s net profit in this period was 77% lower
than
in Q3FY07, standing at US$152mn from US$656mn. Revenue slumped by
6.5% over the period to
US$5.29bn compared to US$5.66bn in the third
quarter of fiscal 2007. MOL President Akimitsu Ashida,
said in a statement
that the dismal results followed a lack of ' confidence' in the shipping
industry, which
' declined sharply after the collapse of Lehman Brothers in
September 2008… [when] cargo trade and
the ocean shipping
market deteriorated rapidly' . The Q3FY08 results for K Line, Japan' s third
shipping
company, followed the trend. The carrier made a net loss of
US$116mn compared to a net profit of
U$266mn in the same period of 2007.
Revenue for the carrier fell by 6.5% to US$3.54bn. In a press
release, the
carrier attributed the fall to ' turmoil in worldwide financial and stock
markets triggered by the
US sub-prime lending issue [which] has
escalated into a global catastrophic crisis' . BMI points out that
the
carriers have also each been weakened by the appreciation of the Japanese yen,
which further eroded
NYK, MOL and K Line' s profitability. Moreover, each
liner has a strong presence in the car carrier
market – an industry
that has shown unprecedented decline in line with the downturn in the autos
sector.
In this, our latest BMI Japan Freight Transport Report, we
forecast average annual growth of freight
carried by sea at 0.7% over the
2009-2013 five-year forecast period.
Our Japanese shipping forecast is
based on various factors. Among them, the Japanese economy has gone
into
reverse. Once the effect of the recession in 2009 is taken into account, we
forecast average annual
GDP growth of 0.7% over the next five years, after
1.7% in the preceding five. Second, the industry is
mature and facing a
global oversupply problem for the next couple of years. While Japan’s
growing trade
with China is a positive, the fundamentals still point to
tough years ahead.
In the current climate we are also relatively cautious
over freight turnover forecasts for other transport
modes. Demand for air
freight has slumped. Road freight is expected to see lower fuel prices, but
demand
will be disappointing. As a result of these adjustments, we now
expect average annual growth in total
freight turnover to be 0.8% over the
2009-2013 period. The operating environment is good, but not
spectacular.
Japan has a composite score of 58.8 out of a potential total of 100.0 in our
freight transport
rating. Japan scores highly for long-term economic and
political risk, transport infrastructure growth and
for the regulatory and
competitive environment. But its overall score is lowered, due to weaker
performances for freight growth and on the transport intensity index, which is
a measure of foreign-trade
dynamism. This is not unusual for a more
developed economy like Japan, where growth rates are much
more
moderate.
According to our latest estimates, for the 2009-2013 forecast
period, we expect the transport and
communications sector to follow the
economy as a whole with growth of 0.7%. The total value of
transport and
communications GDP will rise to US$312bn in nominal terms by 2013,
representing 6.3%
of Japan’s GDP. The transport and communications
sector employed 4.02mn people, or 6.3% of the
labour force, in 2008. We
see the first figure falling to 3.97mn by 2013, while as a proportion of the
total
labour force, employment in the industry will continue at the 6.3%
level.
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