PRLog (Press Release) -
Dec 21, 2009 -
Japan's largest shipping company, Nippon Yusen K.K. (NYK), has been forced to downsize its planned fleet expansion as it prepares for slow growth during the period of 2009-2011, according to Bloomberg. NKY president, Yasumi Kuso (as cited by Bloomberg)
, revealed that the liner expected to have 850 vessels in operation by the end of March 2011, as opposed to the 940 originally intended. Again according to Bloomberg, NYK operated 776 vessels as of March 2008. BMI notes that NYK is particularly vulnerable to the global fall in trade volumes. It currently runs a fleet of 116 dedicated automobile carriers - the largest worldwide - and also operates a large container fleet, which accounts for roughly 23% of its total revenue. Japan's automobile and container shipping industries have been among the worst affected by the global economic slowdown. Japanese exports of autos, auto parts and electronic parts decreased by 70.9% in February 2009, while container volumes have also plummeted at several of the country's largest ports. The contraction in demand led NYK to forecast a 38% year-on-year (y-o-y) fall in the number of cars it will transport in Q209. It also prompted them to predict a fiscal year loss for its container carrier business. This announcement by NYK represents the latest in a series of cost-cutting measures. The company has already cut capacity of its container fleet on major shipping routes by 20% since Q208, and has revealed plans to scrap or lay off up to 40 of its car-carrier fleet by March 2010, as it looks to reduce expenditure. The company also recently announced an 88% decrease in its expected net income for the fiscal year finishing March 31 2009. Despite the gloomy short-term forecast, BMI notes that the company is maintaining a bullish attitude towards its longer term prospects. We recently reported on NYK's plans to add 30 newly constructed car-carriers to its fleet by 2012, made in order to take advantage of anticipated growth in the Chinese and Indian car production sectors. Nevertheless, the company faces a challenging year ahead, as cargo volumes to and from Japan are expected to be among the worst hit by the global slump in trade volumes. For the 2009-2013 forecast period, we are projecting that overall freight traffic carried growth will be flat, with an average annual change of 0%. This is based on various factors, a main one being that the Japanese economy has gone into reverse. Once the effect of the recession in 2009 is taken into account, we forecast average annual GDP growth of 0.2% over the next five years, after 1.7% in the preceding five. Another factor is that the transport industry is mature, and is facing a global oversupply problem for the next couple of years. Also, demand for air freight has slumped, and road freight is likely to have disappointing levels of demand as well, despite the lower fuel prices that are expected. Another factor is that, while Japan's growing trade with China is a positive, the fundamentals of the situation still point to a tough time. The operating environment is good, but not spectacular. Japan has a composite score of 68.5 out of a potential 100 in our freight transport rating. Japan scores highly for long-term economic and political risk, transport infrastructure growth, and for the regulatory and competitive environment. However, its overall score is lowered due to weaker performances for freight growth and on the transport intensity index, which is a measure of foreign-trade dynamism. This is not unusual for a more developed economy like Japan, where growth rates are much more moderate. According to our latest estimates, for the 2009-2013 forecast period, we expect the transport and communications (T&C) sector to follow the economy as a whole in value terms, with growth of 0.2%. The total value of T&C GDP will rise to US$289.3bn in nominal terms by 2013, representing 6.3% of Japan's GDP. The T&C sector employed 4.02mn people, or 6.3% of the labour force, in 2008. We see the first figure falling to 3.97mn by 2013, while, as a proportion of the total labour force, employment in the industry will continue at the 6.3% level.
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