Tighter container ship supply and demand dynamics caused by the Red Sea crisis helped boost first-quarter profit at Mitsui OSK Lines.
The Japanese shipowner reported net income of ¥107.1bn ($701m) for the first three months of the 2024 fiscal year versus the ¥91.1bn seen 12 months ago.
“The routing via the Cape of Good Hope [caused] by the Red Sea disruption tightened tonnage supply and demand, and raised spot freight rates sharply, resulting in a significant profit increase,” MOL said on Wednesday.
MOL’s container ship business reported a profit of ¥42.7bn for the April to June period against ¥23.8bn in the same period last year.
Global container freight rates have increased threefold since the end of 2023 with much of that coming at the end of March 2024.
The Containerized Freight Index surged from 1,750 points in late March to as high as 3,750 points in the early part of this month.
MOL said the improved figures were also aided by a robust performance of its energy business, including chemical tankers, and the weakness of the yen.
“In addition to the contribution of long-term contracts, the market for VLCCs and product tankers remained firm due to the increase in tonne-miles caused by the Russia-Ukraine conflict and the tight tonnage supply and demand due to the prolonged Red Sea disruption,” MOL said.
“Chemical tankers increased profit with the favourable market and with the contribution from Fairfield Chemical Carriers, following its acquisition by MOL Chemical Tankers.”
The one weak area was dry bulk, with MOL reporting a year-on-year decline for this sector of over 73% to an ordinary profit of just ¥6.9bn.
“The capesize bulker and small and medium-size bulker market rates remained firm due to steady iron ore shipments from Western Australia and Brazil, solid bauxite shipments from West Africa, and steady grain shipments from South America,” MOL said.
“However, profit declined year on year due to the softening of the wood chip carrier and multipurpose ship market conditions and the absence of profit from the reversal of an allowance for doubtful accounts recorded in FY2023.”
The strong start to the year has prompted MOL to upgrade its profit forecast for the second quarter and full year by 19% to ¥105bn and 56% to ¥335bn, respectively.
“Profit is expected to increase with favourable freight market conditions based on the assumption that the tensions in the Red Sea will continue for the time being,” MOL said.
