Dry bulk market buoys Japanese lines

Dry bulk market buoys Japanese lines    Japanese ocean carrier MOL on Friday revised upward its revenue and profit forecast for its fiscal year ending March 31, as Japan's big three lines unveiled their third quarter financial statements.
   For the first nine months of its fiscal year, MOL saw its revenue drop 37 percent, to 985 billion yen ($10.9 billion), while operating profits fell 99 percent to 2 billion yen ($22 million). However, the line has recovered well from a troubling first quarter in which it posted a 41 percent drop in revenue and 12 billion yen ($133 million) in operating loss, compared to 73 billion yen ($811 million) in operating profit in the first quarter of the 2008 fiscal year.
   Helping MOL, and compatriot lines 'K' Line and NYK Line, was a bumper market for dry bulk goods (driven by demand from China) and firming ocean container rates.
   'K' Line saw its nine-month revenue fall nearly 42 percent to 612 billion yen ($6.8 billion), while it went from an 89 billion yen ($989 million) operating profit in the first three quarters of 2008 to a loss of 53 billion ($589 million) in the same period in 2009. 'K' Line was one of the top performers in American Shipper's annual Who's Making Money report (July 2009, pages 40-51), which was based on 2008 revenue and profits of the world's top 20 liner carriers.
   MOL, meanwhile, buoyed by increased dry bulk demand, said Friday it has increased its revenue and profit expectations for the current fiscal year. Three months ago, the line was forecasting revenue for the year of 1.3 trillion yen ($14.4 billion) and operating profits of 10 billion yen ($111 million). Now MOL is forecasted revenue of 1.35 trillion yen ($15 billion) and operating profits of 13 billion yen ($144 million).
   'The dry bulker market is expected to hold steady thanks to China’s strong demand for iron ore and coal imports,' MOL said in a statement. 'And an improvement in the tanker market is also anticipated due to recovery in demand for petroleum products and the withdrawal of single-hull VLCCs. In addition, the global economy is bottoming out and the containership business is expected to see increased cargo trade and progress toward recovery of freight rates.'
   MOL's expectation of profits for the year is driven almost wholly by its bulk division. Its container division posted a three-quarter net loss of 50 billion yen ($555 million), compared to an 8 billion yen ($89 million) loss in the same period in 2008. The line is forecasting a 58 billion yen ($644 million) loss for the year for the container shipping business.
   The line said there was a 'large decrease in profits compared to the same period in fiscal year 2008, but deficits are shrinking due to recovery of cargo movements, restoration of freight rates and cost reduction efforts.'
   Volume for MOL on the key head-haul east/west trades plummeted 15 percent on the eastbound transpacific and 34 percent on the westbound Far East/Europe lane in the first three quarters.
   'K' Line said its third quarter volumes (October through December) fell 1 percent on the eastbound transpacific and 23 percent on the westbound Asia/Europe lane. Both backhaul legs saw sizable growth, however, with the westbound transpacific volume surging 57 percent and the eastbound Europe-to-Asia trade up 22 percent (the line didn't provide three quarters volume figures).
   Like MOL, 'K' Line benefited from steady demand from China for iron ore, while supply was tightened by demand for coal and grain, pushing up rates.
   NYK Line is forecasting a 58 billion yen ($644 million) loss for the fiscal year (like MOL) and a 22 billion yen ($244 million) loss for the entire company. For the first three quarters, NYK as a whole had an operating loss of 32 billion yen ($355 million), compared to a profit of 171 billion yen ($1.9 billion) in the same three quarters in 2008. Revenue slid 39 percent to 1.2 trillion yen ($13.3 billion).
   “We continued the efforts we undertook through the fiscal first half to consolidate our fleet, and average freight rates were up versus the fiscal second quarter on almost all routes as the supply-demand balance improved further with transport volumes retreating only minimally during the low-demand winter season,' NYK said. 'We also continued efforts to cut costs by reducing the number of vessels in operation and other means, and results for some routes, including European and Latin American routes, were up year over year, but the liner trade segment overall significantly underperformed the year-ago third quarter.'
   NYK added that its bulk division's profits were up in the third quarter compared to the same period in 2008.