Japan's Nippon Yusen Kaisha (NYK) has posted a $277.5mln extraordinary loss in the third quarter of year ended 31 March 2016 as it reduced the book value of its fleet inline with current market prices and expectations. The extraordinary loss came after it re-assessed the recoverable value of its dry bulk vessels.
In the global shipping industry, an oversupply in the container shipping market continued due to ongoing steady production of new ultra-large vessels, and freight rates in the shipping market fell to very low levels as a result of a widening gap between supply and demand.
Conditions in the dry bulk carrier market were extremely harsh, with market demand remaining stagnant as the slowdown in China led to a decline in shipping traffic.
"In the dry bulk division, we downward the assumption as market demand remaining stagnant due to the Chinese New Year, while we take further step to reduce costs such as fleet rationalization by idling and lay-up of surplus vessels," says a company statement.
In the dry bulk transport market, while shipments of iron ore and grains were up and shipments of coal were on the decline, market conditions as a whole were extremely sluggish in all regions and for all types of vessels.
Although the scrapping of bulk carriers, particularly capesize ships, has been underway, excess tonnage has not been cancelled out because of the ongoing production of new vessels. Reflecting these factors, the Baltic Dry Index fell to all-time low levels in mid-December, 2015.
Under these circumstances, the NYK Group promoted more contracts that are less susceptible to short-term market fluctuations, and took steps to reduce costs, such as using slow steaming and either selling off or returning surplus vessels.
In addition, the Group worked to improve its balance of income and expenditures through a number of initiatives, such as reducing ballast voyages by combining cargoes and more efficiently assigning vessels.