MOL President: Free Tonnages Leading to Losses

MOL President Koichi Muto

Mitsui O.S.K. Lines [TYO:9104] (MOL) is facing a second fiscal year of major losses, and part of the problem lies in the transportation of tonnages with no committed contracts, President Koichi Muto said in a New Year message.

Muto said the current shipping environment is challenging due to high bunker prices, economic slowdowns in Europe, the U.S., and China, as well as appreciation of the yen, but he said "free tonnages" have also contributed significantly to the company's problems.

"....MOL's free tonnages, namely tonnages with no committed contracts, have been operating at a large loss as a result of an unprecedented decline in dry bulker and tanker freight rates," he said.

A widening supply-demand gap for ships kept freight rates low, Moto noted.

"Consequently, MOL's free tonnages, which had generated large earnings when freight rates were buoyant, recorded losses that have significantly eroded the stable earnings accumulated through steady sales efforts in the past."

To address the problem, Muto said the company must reduce the market exposure of free tonnages by winning more cargo while scrapping and selling ships, and delaying the delivery of new vessels.

MOL is also streamlining its operations with moves including centralising its liner headquarter functions in Hong Kong, expanding its dry bulker and tanker business from a hub in Singapore, and looking for new cost-cutting opportunities.

Titling the New Year message "Heaven Helps Those Who Help Themselves," Muto said the company must take responsibility for its own fate.

"I am sure that many of you are honestly hoping for a recovery in market conditions, which have been lackluster for some time," he said.

"However, please remember that we ourselves are responsible for shaping the market through the business decisions we make on a daily basis."

MOL has already increased its use of slow steaming in an effort to deal with the difficult market.