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Strong volumes lift all three Japanese carriers to profit

Strong volumes lift all three Japanese carriers to profit

Japan’s top three shipping carriers reported a collective profit on Tuesday of JPY 26.4 billion, or $238 million, in the first half of 2017, reversing the losses that two suffered in the first half of 2016 in a performance driven by middling rates and strong cargo volumes.

MOL reported a slightly lower profit in the 2017 period than the year before, but both NYK Line and “K” Line reported a profit after sizable losses in the first half of 2016. The carriers said they expect that strong volumes will keep rates from falling despite continuing overcapacity.

The improved performance came amid preparations by the three companies to merge and operate as a single company beginning in April. The three companies operate independently at present but reported their finances on the same day.

The three companies in July established Ocean Network Express Holdings Ltd. (ONE), the joint venture that will house and operate their merged container shipping operations. Jeremy Nixon, the current CEO of NYK Line, has been named CEO of the merged company, which will be known as ONE.

MOL reported a profit of JPY 13.1 billion, of $118 million, a slight decline from the profit of $16 billion, or $144 million in the first half of 2016.

The carrier attributed the performance on the container side to “firm” rates and strong cargo volumes, even as the industry endured strong “fleet supply pressure.” The company said it set a record for volume in July and August on both the Asia-Europe and Asia-North America trade.

NYK Line reported a profit of JPY 6.3 million, or $56,800 dollars, in the first half of 2017. That contrasted with the loss of JPY 231.8 billion, or about $2 billion, in the first half of 2016. The turnaround was helped by “positive overall” conditions in the shipping market, the company said.

“In the container shipping market, while the supply of tonnage remained at similarly high levels as the previous fiscal year, spot freight rates stayed mostly favorable on the back of brisk shipping traffic,” the company said in a release.

“K” Line reported a profit of JPY 13.2 billion, or $119 million, compared to a loss of JPY 50.5 billion, or $455 million in the same period in 2016.

“Freight rates bottomed out in the container ship business as cargo movements in the east-west services remained firm,” the company said in a release. The carrier’s dry bulk business “stayed on the path to recovery” and the company also benefitted from its internal reforms carried out in the last two years to “enhance competitiveness.”

“K” Line reported that overall volume rose 6 percent, led by 14 percent growth on intra-Asia trades and 13 percent growth on the Asia-Europe trade. Asia-North America volume rose 2 percent, while north-south traffic fell 2 percent following the cancellation of services to the east coast of South America.

Container lines, who generally lost heavily in 2016, saw profitability return to the market this year. Maritime analyst Drewry expects the industry to end the year with $5 billion in profit after six years of losses as a result of higher rates and volume.

Cosco reported a $406 million profit for the first nine months of 2017, turning around a $1.38 billion loss during the same period in 2016. In August, Marseille-based CMA CGM posted a second quarter $219 million gain in net income gain on higher volume and pricing, after a second quarter loss of $129 million in 2016.

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