Newly-published 2007 annual results from three big Japanese shipping and logistics groups, NYK Line, MOL (Mitsui OSK Lines) and 'K' Line (Kawasaki Kisen Kaisha), provide a useful insight into the state of several global markets.
NYK Line, by far the largest with sales of ¥2.584bn, describes itself as a 'megacarrier', with a diversified range of activities ranging across not just the shipping sector but also air freight and contract logistics. Unsurprisingly, the best results were delivered by NYK's bulk shipping business. Demand from China for coal and iron ore remained greater than the shipping sector's ability to deliver it, resulting in a 73% jump in operating profit. Car-carrying also experienced under-capacity and therefore higher profits, although less predictably, the oil tanker market was not so strong.
Slightly more surprisingly, container trades also proved to be strong for NYK, producing a 21.4% increase in operating income. NYK hints that uptrend was driven by the strength of Asia- Europe traffic rather than the transpacific market.
In terms of shipping, MOL reported quite similar market conditions, with routes other than transpacific sectors driving up its container traffic. Bulk cargo volumes and car traffic were also very strong although profitability was hit by much higher fuel prices and depreciation methods, resulting in an actual fall in group operating income of 3.9% and a rise in net income of just 5.1%.
The shipping picture painted by 'K' Line was very similar, with strong demand for bulk commodities such as iron ore and coal, as well as car transport, supported by the continuing strength of container trades other than the falling transpacific market. 'K' Line's net income jumped 61% on revenue up 23%.
In other markets, NYK reported modest revenue growth from its contract logistics activities of 9% although the business again only broke even. The group's air cargo business was even more unprofitable, reporting a loss of ¥22bn, although that appeared to be as much to do with the cost base of Nippon Cargo Airlines (NCA) as market conditions.
In their forecasts for the coming year, all three Japanese companies suggested continuing strong markets in shipping and other services except into the US. All expect European demand to continue to grow sufficiently to absorb excess capacity from transpacific trades, although MOL hit a note of caution about the continuing strength of demand from China after the Olympics.
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