Mitsui O.S.K. may cut profit forecast on slump in charter rates
Mitsui O.S.K. Lines Ltd., Japan's most profitable shipping line, may lower its earnings forecast this fiscal year as daily charter rates for its largest coal and iron ore vessels have tumbled 98 percent to a record low. "We're reviewing our forecasts,'' Kenichi Yonetani, a managing executive officer at Mitsui O.S.K., said in a Bloomberg Television interview aired today. We may not meet our targets.'' The world's largest merchant fleet operator may mothball vessels as daily charter rates have dropped by more than half since it cut its profit forecast in October. Demand for commodity transport has slid as China, the world's biggest user of iron ore, has slashed steel production and economic growth in the U.S., Europe and Japan is forecast to shrink next year, according to the Organization for Economic Cooperation and Development.
The dry-bulk market is dramatically lower than Mitsui O.S.K.'s forecasts,'' said Osuke Itazaki, an analyst in Tokyo at Credit Suisse Group. There's a very strong chance they will have to cut their earnings predictions.''
China's growth fell to the slowest in five years in the third quarter as it shuttered factories during the Beijing Olympics and a financial crisis cut demand for exports. The world's biggest user of iron ore cut steel production 19 percent in October, according to Macquarie Group Ltd. estimates.
The shipping line, which gets more than 90 percent of its profit from shipping commodities, said on Oct. 27 that its net income for the year ending March 31 would be 195 billion yen ($2.1 billion).
Buying Opportunity
Charter rates for the Tokyo-based company's largest ships tumbled to a record low of $2,364 a day on Dec. 1, according to the London-based Baltic Exchange, compared with Mitsui O.S.K.'s average forecast of $20,000 a day for the three months to Dec. 31. The company charters 15 of about 100 capesize vessels at daily rates.
The slump in charter rates has led some shippers to fail and may cause others to default on loans.
The Ukraine's Industrial Carriers Inc. filed for bankruptcy protection in October and Britannia Bulk Plc was placed in administration the same month. Half of commodity shipping lines are likely to breach loan terms in the months ahead as rental rates and vessel prices fall, Nordea Bank AB, the world's largest arranger of loans to the industry, said last week.
Mitsui O.S.K., which plans to boost its fleet by 37 percent by the end of March 2013, views the slump as a chance to buy weaker competitors, Yonetani said.
Building new ships isn't the only way to expand,'' Yonetani said. We'd consider buying out companies that approach us. There are some attractive shipping lines in Europe.'' He declined to name any companies.
Mitsui O.S.K. fell 1.9 percent to 457 yen at the 11 a.m. trading break on the Tokyo Stock Exchange.
The dry-bulk market is dramatically lower than Mitsui O.S.K.'s forecasts,'' said Osuke Itazaki, an analyst in Tokyo at Credit Suisse Group. There's a very strong chance they will have to cut their earnings predictions.''
China's growth fell to the slowest in five years in the third quarter as it shuttered factories during the Beijing Olympics and a financial crisis cut demand for exports. The world's biggest user of iron ore cut steel production 19 percent in October, according to Macquarie Group Ltd. estimates.
The shipping line, which gets more than 90 percent of its profit from shipping commodities, said on Oct. 27 that its net income for the year ending March 31 would be 195 billion yen ($2.1 billion).
Buying Opportunity
Charter rates for the Tokyo-based company's largest ships tumbled to a record low of $2,364 a day on Dec. 1, according to the London-based Baltic Exchange, compared with Mitsui O.S.K.'s average forecast of $20,000 a day for the three months to Dec. 31. The company charters 15 of about 100 capesize vessels at daily rates.
The slump in charter rates has led some shippers to fail and may cause others to default on loans.
The Ukraine's Industrial Carriers Inc. filed for bankruptcy protection in October and Britannia Bulk Plc was placed in administration the same month. Half of commodity shipping lines are likely to breach loan terms in the months ahead as rental rates and vessel prices fall, Nordea Bank AB, the world's largest arranger of loans to the industry, said last week.
Mitsui O.S.K., which plans to boost its fleet by 37 percent by the end of March 2013, views the slump as a chance to buy weaker competitors, Yonetani said.
Building new ships isn't the only way to expand,'' Yonetani said. We'd consider buying out companies that approach us. There are some attractive shipping lines in Europe.'' He declined to name any companies.
Mitsui O.S.K. fell 1.9 percent to 457 yen at the 11 a.m. trading break on the Tokyo Stock Exchange.