The catastrophic events triggered by the Great East Japan earthquake and tsunami in March that devastated large areas of Japan and killed thousands also had an impact on automotive supply chains worldwide that is still working its way through the industry. With so many key components suppliers located in the afflicted area, the automotive industry was among the worst affected.
It took until August before the Japanese automotive industry regained its feet and, even now, the damage has not been fully repaired. August was the first month since March in which production levels rose above their 2010 equivalents. Exports also surged, up by 7.6 percent to 363,772 vehicles, according to figures from the Japan Automobile Manufacturers Association.
“The faster-than-anticipated recovery in the component supply situation has pushed most of the Japanese automakers towards pre-disaster levels of production, with the restoration of full, unrestricted output likely towards the end of this year,” said Paul Newton, senior analyst at IHS Automotive.
Although some of the losses suffered by owners were offset by demand from South Korea, where producers have recorded all-time high exports every month since March, the impact on car carrier operators active in the Japanese export market has been severe.
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Japanese shipping conglomerate NYK, which operates a fleet of some 100 ro-ro car carriers, said volume in the quarter ending June 30 was 40 percent lower than the previous year due to the disruption caused by the earthquake. “We responded to the temporary slump by laying up vessels and operating vessels at reduced speeds in order to control cost,” said the carrier.
In the same quarter ‘K’ Line, another Japanese shipping giant, saw the number of cars handled on its outbound North East Asia service fall to 162,000 vehicles, 80,000 less than were handled a year earlier. The “cargo drop damaged our profit significantly” said ‘K’ Line. The carrier estimated its car carrier business would not return to profitability until the final quarter of 2011.
The financial impact is still spreading.
Eriksen said average time-charter earnings for modern 4,000 CEU pure car truck carriers would fall this year to an estimated $11,000 per day, from $11,500 per day last year.
“Previous forecasts of a 9 percent growth in tonnage demand for PCTCs in 2011 needed to be downgraded as a result of the situation in Japan,” he said. “By assuming that Japanese exports remain at 2010 levels from September 2011 onwards, the shortfall of Japanese exports during March to August results in a reduction in world tonnage demand growth by approximately six percentage points to 3 percent for 2011.”
Despite the lay-ups earlier this year, the post-earthquake scenario was probably much worse for shipowners. After five years of scrapping, RS Platou Markets puts the active worldwide fleet of PCTC vessels at 671, with an average age of just 9.1 years. Vessel supply growth was just 1 percent in 2010 and will increase 6 percent this year. That is a far cry from the over-tonnaging evident in most major shipping sectors.
Looking forward, the outlook is also positive. The PCTC orderbook stood at only 53 vessels as of early October, translating into PCTC fleet growth of 5.6 percent and 1.9 percent in 2012 and 2013, respectively. This will easily be offset by tonnage growth, which is due to soar by 15.4 percent next year and by 9 percent again in 2013.
“Japanese exports returning to expected levels with a healthy growth, in combination with increased sales, inventory build-up and a shrinking orderbook, will hopefully bring us back toward full utilization of the PCTC fleet in 2012,” Eriksen said.
As a result, operators are optimistic moving forward despite the supply chain kinks still being suffered by some manufacturers. “We have experienced a good rebound in volumes ex Asia where exports from Korea have steadily grown and Japan has returned to higher volumes than in 2010, having recovered from the tsunami,” said Olav Sollie, head of shipowning at Hoegh Autoliners. The company operates a fleet of some 60 PCTCs including chartered tonnage.
Christen Schreuder, head of commercial for Asia at Wallenius Wilhelmsen Logistics, which operates a network of car carrier services out of Asia as well as its own port terminals and hubs, said demand from Asia for automotive and oversize ro-ro services was “strong” at present, further constricting an already “tight” global carrier vessel market.
“We have expanded frequency to offer a weekly dedicated service to/from China/Japan/Korea,” he said. “We are also adding capacity as volumes grow on all intra-Asia trades, and we will continue to improve frequency and capacity to meet our customers’ growing demand.”
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Schreuder predicted strong demand for at least the next six months, adding the caveat that recession in Europe or the U.S. could potentially drag the market down. “With the current uncertainties in the global economy it is difficult to anticipate what exact impact this will have on deep-sea volumes … but we do not see any major impact on the intra-Asia trade.”
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