Lack of Committed Charters Cause of MOL's Losses

Press Release
Monday, January 07, 2013

In his New Year message, Mitsui O.S.K. Lines President Muto predicts loss in 2013 of same magnitude as last year, suggests new business model.

Excerpts from Mr. Muto's message follow:

"The marine transport industry has faced a challenging external environment mainly due to economic slowdowns in Europe, the U.S. and China, the yen's appreciation, and high bunker fuel prices. This has certainly been a factor behind MOL's losses. However, we must also take a hard look at reality and ask ourselves why MOL has fallen into this predicament.

The biggest reason is that MOL's free tonnages, namely tonnages with no committed contracts, have been operating at a large loss as a result of an unprecedented decline in dry bulker and tanker freight rates. While dry bulkers' deliveries in 2012 surpassed the record-high level of the previous year, the seaborne trade volume of resources and energy grew at a slower pace due to slowing Chinese economic growth. This has widened the supply-demand gap for vessels, causing freight rates to remain at historically low levels over an extended period. Consequently, MOL's free tonnages, which had generated large earnings when freight rates were buoyant, recorded losses that have significantly eroded the stable earnings accumulated through steady sales efforts in the past. As a result, the company as a whole fell into the red.

Starting from around the second half of 2013, we are projecting firm seaborne trade volume centered on emerging countries, while the supply of new vessels is expected to decline. We believe that freight rates will start to recover in step with an improving supply-demand gap for vessels. However, Chinese shipyards and other players have significantly expanded their scale of operation in recent years. If they continue to build new vessels at a rapid pace going forward to keep running their business, this shipbuilding could weigh heavily on the recovery of freight rates. To ensure that we restore profitability based on a stressed scenario where the business environment remains extremely challenging in 2013, we must shift to a business structure that is not reliant on a recovery in freight rates.

Future Measures


First we must reduce the market exposure of free tonnages, which is the driving factor behind our losses. Generally speaking, market downturns are a time for procuring competitive free tonnages. However, to reduce the risk of a decline in earnings due to market swings at the present time, we must work to reduce our market exposure by winning as much cargo as possible, while gauging the right timing.

Furthermore, we must enhance MOL's resilience to market fluctuations by reducing its exposure to the risk of changes in market conditions. To this end, we must do everything we can to reduce the number of free tonnages in cooperation with our business partners. Measures will include the scrapping, sale, and redelivery of vessels as well as delaying delivery of new vessels."

Mr. Muto concluded in some detail, with an explanation of these, and other measures to be taken by the company in order to return it to profitability.
 

 

Maritime Reporter May 2015 Digital Edition
FREE Maritime Reporter Subscription
Latest Maritime News    rss feeds

Contracts

SFL Adjusts Charter Agreement with Frontline

Ship Finance International Limited (SFL) announced that it has entered into a heads of agreement to amend the long-term chartering agreements with Frontline Ltd.

New Ship Continues Atlantic Offshore's Fleet Modernization

Atlantic Offshore Rescue will unveil the third new vessel in the past 12 months as part of its fleet modernization program, representing an investment totaling $458 million.

Frontline Beats Q1 Forecasts, Inks Ship Finance Deal

Crude oil tanker firm Frontline posted first-quarter operating profit above expectations on Friday and said it had renegotiated its relationship with chartering

Tanker Trends

US Oil Contango Vanishing as Supply Glut Shifts Abroad

The U.S. oil market is on the brink of returning to a more bullish footing known as backwardation for the first time in six months, with the discount for prompt

New Power Optimization Solution for LNG Carriers

NAPA and DSME launch tailored NAPA-DSME Power Solution for LNG carriers; leading LNG carrier shipyard offers specialized performance monitoring solution   South Korean shipbuilder,

SFL Adjusts Charter Agreement with Frontline

Ship Finance International Limited (SFL) announced that it has entered into a heads of agreement to amend the long-term chartering agreements with Frontline Ltd.

Bulk Carrier Trends

Vale to Ship Coal Along Mozambique Nacala Corridor

Brazilian miner Vale SA  plans to start exporting coal along the Nacala rail and port corridor in Mozambique and Malawi in the third quarter after heavy rains damaged the rail line,

Q88 LLC Opens Office in London

Q88 LLC has opened a new office in London. Located in Soho, the cultural center of London's West End district, the office will serve as a hub for business development and client relations.

IRS Introduces Ship Construction Standards

The International Register of Shipping has submitted goal-based new ship construction standards for verification audit by the International Maritime Organisation.

Finance

US Oil Contango Vanishing as Supply Glut Shifts Abroad

The U.S. oil market is on the brink of returning to a more bullish footing known as backwardation for the first time in six months, with the discount for prompt

Mexico Removes Bid Limit on Shallow Water Oil Tenders

Mexico's oil regulator on Friday voted to remove limits on how many blocks companies can bid on in the first 14 shallow water exploration contracts up for grabs later this summer.

Wärtsilä Acquires L-3 MSI

Wärtsilä completes acquisition of L-3 Marine Systems International    Wärtsilä Corporation announced that its acquisition of the Germany based L-3 Marine Systems

 
 
Maritime Careers / Shipboard Positions Maritime Contracts Maritime Standards Offshore Oil Pod Propulsion Salvage Ship Electronics Ship Repair Ship Simulators Shipbuilding / Vessel Construction
rss | archive | history | articles | privacy | contributors | top maritime news | about us | copyright | maritime magazines
maritime security news | shipbuilding news | maritime industry | shipping news | maritime reporting | workboats news | ship design | maritime business

Time taken: 0.2108 sec (5 req/sec)