Asia/Pacific News
MOL Expecting 1.4 Billion Loss on Dry Bulk, Box Woes Despite "Tailwind" from Low Bunker Prices
Despite a "tailwind" from low bunker prices, Mitsui O.S.K Lines (MOL) Friday announced that as a result of historic low freight rates in the dry bulk and container sectors it expects to book a loss of ¥175.0 billion ($1.44 billion) for the full year ending March 31, 2016.
The hefty loss is almost entirely due to the decision to book an extraordinary loss of up to approximately ¥180.0 billion ($1.49 billion) in the fourth quarter for structural reforms including the disposal of vessels in its dry bulker and containership businesses.
MOL said the revised outlook is the result of "a significantly weaker than anticipated dry bulker market despite the tailwind of lower bunker prices, as well as a delay in recovery of containership freight rates."
In a backgrounder included in the release the company noted that, in the case of the dry bulker business, "the market is deteriorating to a new record low due to the imbalance of fleet supply and demand, along with stagnant cargo trade resulting from the slowdown in China's economy since last fall."
In terms of the containership business, low cargo volumes for Europe and emerging countries, along with a succession of newly built vessels coming into service, had kept freight rates "at historic lows."
"Although the Company expects the market to recover to some extent, in light of its uncertainties it decided to implement structural reforms in these businesses to address the abruptly changing business climate," said MOL.
The company announced it will reduce the number of free Capesize vessels and withdraw from offering excess tonnage in the free-vessel market for Panamax and other mid- and small-size bulkers.
On the containership side of the business the company will undertake efforts to "capture more profitable cargoes, based on reducing fixed costs through rationalization, mainly on North-South routes, and fleet reductions focused on mid-size vessels."
On Monday Ship & Bunker reported the Baltic Dry Index had fallen to a new record low of 314.
