Earnings recovery at Japan’s top shipping lines picks up steam
Profits at Japan’s three leading maritime shippers are expected to rebound sharply in the fiscal year ending March 2019 as the merger of their containership businesses bears fruit amid a global economic recovery.
Industry leader by revenue Nippon Yusen’s group pretax profit is seen rising roughly 50% over the estimated result for the just-ended fiscal year to about 40 billion yen ($368 million). Third-ranked Kawasaki Kisen Kaisha will likely triple profit to around 10 billion yen, while second-ranked Mitsui O.S.K. Lines will probably enjoy strong growth as well.
But the trade frictions between the U.S. and China threaten to sink the global trade recovery — and the trio’s rebound — if they escalate further.
The three companies created a joint venture last July to integrate containership operations, with service beginning this month. They forecast an annual profit boost of up to 110 billion yen in three years from combining routes and facilities.
Shipping demand is also looking up as the world economy grows at a healthy pace. Global merchandise trade volume will expand 4.4% in 2018, the World Trade Organization projects.
Shipments of iron ore and coal to emerging economies are rising, and trade in automobiles and other goods is strong. Meanwhile, increases in Chinese shipping capacity have eased, and the Japanese trio are shrinking their fleets. A tighter market for maritime shipping services is pushing rates up.
Nippon Yusen, Kawasaki Kisen and Mitsui O.S.K. suffered significant downturns in the two years through March 2017 amid a decline in commodity prices, which depressed shipping rates. Each year saw two of the companies suffer net losses.
With these headwinds gone, all three are expected to eke out net profits for the fiscal year ended this March. Full-year results come out Friday.