MOL Advantage 3

Japan’s MOL said today that it is forecasting a massive $1.45bn loss for its fiscal year ending 31 March, after deciding to take the full hit of its dry bulk and container shipping restructuring into its fourth-quarter results.

It said that it wanted to “address the abruptly changing business climate” by withdrawing from certain sectors of the dry bulk market and taking steps to rationalise its container business, particularly on north-south routes.

“As soon as the details of each measure are determined, the company will separately announce them in accordance with timely disclosure rules,” it said in a statement.

These changes are likely to happen promptly, given that MOL wants to swallow the financial pain in its current financial year, rather than carrying it forward.

At last week’s World Economic Forum in Davos, Maersk Group chief executive Nils Andersen referred to his company’s involvement in both shipping and oil as being a “bit of a perfect storm”, given the dramatic fall in oil prices and the squeeze on container freight rates. And from the content of MOL’s statement today, the Japanese transport group is clearly is in the eye of its own storm with its two ailing shipping sectors.

MOL said that the “containership market remained extremely weak on all routes”, particularly from Asia to Europe and South America, but it also referred to a “slump” in intra-Asia trades, which have hitherto been seen as robust.

MOL said that it saw no immediate upturn in container markets and expected the “harsh business climate to continue”.

This had been compounded by the delivery of too many large vessels.

Its compatriot, K Line, said in its nine-month results, also released today, that its container shipping revenues had declined 4.2% and the division posted a loss of $34.6m. NYK said its profits slightly increased due to cost control measures.

Both said trade fundamentals remained weak, with little prospect of improvement.

Indeed, this week CSCL warned that it would record an estimated loss of $450m for 2015, while OOCL released its operational numbers for the fourth quarter revealing a 36% dive in its revenue for Asia-Europe in the final three months of the year, compared with the same period of 2014.

In fact, there seems no end in sight to the freight rate carnage on many of the overcapacity-plagued trades of the world, with today’s Shanghai Containerized Freight Index (SCFI) recording another dip for the key Asia-Europe routes. Spot rates on the SCFI for North Europe declined by a further $76 per teu down to $469, but for Mediterranean destinations the slump was greater at $141, taking rates down to $488 per teu.

The real significance of the continued fall in Asia-Europe spot rates is that it has happened in the so-called peak demand period, prior to the Chinese New Year holidays, which begin on 8 February, and comes despite general rate increases announced for the beginning and middle of January.

Moreover, carriers on the trade are looking at very weak demand prospects post-CNY, with both the G6 and 2M alliance members having announced blanked sailings and inducement-only calls, over a three week period.

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