NYK Line has joined rival Mitsui OSK Lines in posting a huge decline in first-half profit as it contends with the slump in the liner market.
The Tokyo-listed shipowner posted a recurring profit of ¥159.2bn ($1.06bn), which was down ¥606bn from the corresponding period last year.
“In the container shipping division, despite summer typically being the period of seasonally strong demand, cargo demand was weak due to the impact of inflation and higher interest rates mainly in the US and Europe and high inventories in North America,” NYK Line said.
“At the same time, shipping capacity increased following the completion of new ships, and as a result, market levels were lower compared to the same period last year. At Ocean Network Express, freight rates and profit levels fell year on year.”
Last week, Singapore-headquartered ONE, in which NYK Line has a 36% stake, saw net profit fall by over 90% in the first half of the year, to just $700m.
In NYK Line’s dry bulk business division, the capesize fleet experienced market trends slightly below those of the same period the previous year, primarily influenced by the economic slowdown in China.
“In the panamax and smaller segments, although shipment volumes of coal and grain were firm, markets trended below the high levels recorded during the same period last year,” it said.
“Within this business environment, efforts were made to reduce the risk of market volatility through the use of futures contracts, stabilise earnings through the acquisition of long-term contracts and reduce costs through efficient operations.”
In the energy business division, NYK Line’s VLCC fleet saw markets soften from July after entering the seasonal period of weak demand and the decision by major oil-producing countries to cut production. However, supported by the strong levels during the first quarter, markets trended at levels above the same period last year, it said.
In the VLGC segment, NYK Line said the increased long-distance shipments from the US to Asia, as well as the impact of transit restrictions at the Panama Canal, caused supply-and-demand conditions to tighten.
“The market recorded record highs in September and trended at levels greatly exceeding the same period last year,” NYK Line said.
Looking ahead, NYK Line said that although cargo traffic is expected to gradually recover in the second half of the year it will likely take some time for a full-scale recovery to occur.
“Large-scale delivery of new vessels has begun this fiscal year, and pressure from this shipping capacity will likely continue to weigh on markets,” it said.
“Although the freight rate markets are assumed to remain challenging to a certain extent, we aim to improve earnings through various measures, including agile vessel deployment in line with demand.”
