A number of Japanese shipping lines appear to have concluded that in the current volatile conditions the dry bulk market is a safer bet than the container business. In May Japanese shipping line Shinwa Kaiun Kaisha (SKK) further exposed itself to the dry bulk market by buying the transport subsidiary of Nippon Steel, Nippon Steel Shipping. The merger, which was due to be completed in October 2010, will see SKK double the size of its fleet. In a press release SKK stated that 'looking at the future of the dry bulk market, on the demand side, it is hoped that the market will grow once again, supported by the recovery in actual demand centred on China'. BMI cautions, however, that the Chinese economy may cool down next year.
A second reason for our caution is that China plans to develop its own fleet to meet its shipping needs, meaning that in the mid to long term we could see decreased demand for non-Chinese vessels as the country develops its merchant fleet and decreases its reliance on foreign shipping lines. That said, the merger will protect against further volatility, as the joining of the two companies will consolidate Japan's dry bulk shipping sector, ensuring that companies are working together rather than competing during a period of uncertainty.
The local environment facing Japan's ports and shipping industry was difficult in mid-2010. The new administration of the Democratic Party of Japan (DPJ) was still struggling to measure up to the challenges of government. The replacement of the prime minister (Yukio Hatoyama resigned at the beginning of June and was succeeded by Naoto Kan) was taken as a sign that the DPJ had yet to find its stride. Meanwhile, the economy continued to be a source of concern. BMI predicts a poor investment outlook, muted consumer spending, and a downturn in exports as Chinese and US demand is expected to falter. After falling by 5.8% in the recession year of 2009, BMI predicts that Japanese GDP will grow by 1.9% in 2010, but then lose momentum again with growth of only 0.9% in 2011.
At the Port of Yokohama (POY) we are predicting 5.7% growth in total tonnage this year to 122.082mn tonnes, representing a partial recovery after the very steep slump in 2009, when tonnage fell by 18.5%. At the Port of Tokyo (POT) this year we see total tonnage gaining by 7.0% to 91.163mn tonnes, a partial recovery from 2009's drop of 10.6%. In both ports container handling will grow somewhat faster than general tonnage, with the rate of expansion set to be sustained over the next five years.
In real terms, Japan's foreign trade (imports plus exports) slumped by 21% during the global recession in 2009. BMI is predicting an 8.1% recovery this year, followed by lower growth of 4.8% in 2011 as we enter potential global 'double dip' territory. Average annual foreign trade growth in the five years to 2014 will be 6.2% per annum. Imports will grow by 7.3% per annum in real terms, ahead of exports at only 5.4%.
The balance of risks to our Japanese shipping forecasts is on the downside. We see the main risk as coming from the fragile nature of the Japanese economic recovery. A somewhat inexperienced government is seeking to manage an extremely difficult fiscal situation and a heavy debt overhang. If the DPJ administration miscalculates, the likely outcome is a loss of business confidence and slower growth, even a fall back into recession.
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Report Table of Contents:
Executive Summary
SWOT Analysis
- Japan Shipping SWOT
Global Overview
- Container Shipping Overview
- Dry Bulk Overview
- Liquid Bulk Sector Overview
Industry Trends And Developments
Market Overview
- Port of Yokohama
- Overview
- Terminals, Storage And Equipment
- Expansions And Developments
- Multi-Modal Links
- Port of Tokyo
- Overview
- Terminals, Storage And Equipment
- Expansions And Developments
- Multi-Modal Links
Industry Forecast
- Table: Major Port Data
- Table: Trade Overview
- Table: Key Trade Indicators
- Main Import Partners
- Main Export Partners
Company Profiles
- A.P. MOLLER-MAERSK
- Mediterranean Shipping Company
- CMA CGM
- Evergreen Line
- China Ocean Shipping (Group) Company (COSCO)
- Hapag-Lloyd
- Neptune Orient Lines (& APL)
- China Shipping (CSCL)
- Nippon Yusen Kabushiki Kaisha (NYK)
- Hanjin Shipping
- Mitsui OSK Lines (MOL)
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