Japanese Lines Warn of Tough Year Ahead

Japan’s top three ocean carriers are girding for a difficult 2012 amid vessel overcapacity and sluggish European and U.S. economies, the presidents of MOL, NYK and “K” Line said in their annual New Year’s messages.

“Large-scale completion of new vessels is expected to continue this year, so we should prepare ourselves for a prolonged harsh business environment, and approach it with due care,” MOL President Koichi Moto said.

Analysts, including Alphaliner, argue that the three container lines should be spun off from their parent companies and merged into one container carrier.

All three of the diversified carriers said the March 11 Japan earthquake and floods in Thailand and Australia contributed to a difficult market that produced losses in 2011. Their losses topped $700 million in the first half of their current fiscal years and all three said in October they expected to post losses for the full year ending March 31.

Moto said the disasters exacerbated “a very difficult business environment, including the strong yen, high fuel prices, downward pressure on the market due to the oversupply of shipping capacity, and a decline in demand caused by the economic downturn.”

He said an “extremely harsh” container shipping environment that will continue through next year but that deliveries of new vessels are expected to level off after 2013, providing some light at the end of the tunnel. He predicted market forces eventually will cause “the excessive production capacity of shipyards in China” to slacken.

The Japanese carriers took a conservative approach to new vessel orders during the container ship construction boom of recent years. NYK President Yasumi Kudo said his company has halted new orders of container ships and plans to charter vessels as needed while expanding in “asset-light” businesses such as forwarding and logistics.

U.S. and European economies remain shaky but prospects are brighter for developing countries. “Growing demand in Asia will be the key for strong growth in the region overcoming the slump in the West … Asia is no longer only an exporting region but (is) creating an enormous consumer market surpassing the U.S. or Europe,” he said.