Mitsui OSK Lines
Mitsui OSK Lines (MOL)'s container operations are relatively small compared with its dry bulk and tanker operations. In FY12 the container unit's revenue accounted for 37.9% of the group's total. In terms of vessels, container ships account for just 0.8% of the total number of ships operated by MOL.
The company is Japan's largest container line and is ranked 10th by AXS Alphaliner in terms of global market share.
MOL operates a global route portfolio, with a considerable presence on the major trade routes of the trans-Pacific and Asia-Europe via its membership of the New World Alliance, which it joined in 1998. It is also expanding its intra-Asia route portfolio and breaking into emerging trade routes such as Asia-Africa.
MOL's history dates back to 1964 when Mitsui Steamship Company, a division of Mitsui & Co, merged with OSK Lines, which was founded in 1884. In 1968 the company sent its first container ships on the Japan-California route.
Japan's largest container shipping firm.
Its container operations have access to the expertise and funding of a larger shipping group.
MOL's terminal operations complement its container shipping operations, ensuring the box line has priority access to some of the world's busiest ports.
Membership of the New World Alliance has enabled it to increase its coverage of the 'big money' routes while mitigating risk.
MOL's dry bulk and tanker operations take precedence and attract more investment than the firm's container business.
The company posted a loss in H1 FY2013 financial year and is expecting to remain in the red for the full financial year.
A growing emerging market presence and was one of the first major shipping lines to enter the promising Vietnamese container shipping market.
Well placed to benefit from the growing trade demand on the intra-Asia route. BMI believes the firm will use its current position to carve out a considerable market share on this route.
It is exploring new markets and has increased its exposure to services in Africa, an emerging trade route that, in BMI's opinion, offers considerable promise.
The company broke into the top 10 ranked global container companies in Q411 and remains there.
MOL stands to benefit from the Japanese government's revision of the tonnage tax system, which has been expanded to cover foreign vessels that are owned by foreign subsidiaries of Japanese ocean-going shipping firms and also meet certain requirements.
A merger with other Japanese lines would offer more protection in the current tough operating environment.
Overcapacity remains a major problem for the industry.
The company trails behind its peers in terms of the size of its vessels, with its largest ships handling 8,000 twenty-foot-equivalent units (TEUs). However, it is due to join the 13,000TEU club in 2014.
MOL has been ranked one of the top 10 container companies. The company, with 3% of market share, is currently in 10th position. Hong Kong-based CL follows with a market share of 2.7%.
RoutesMOL's container operations have progressed from catering for Japan's trade needs; the carrier now operates a global service. It has increased its exposure to the 'big money' routes of trans-Pacific and Asia-Europe via membership of the New World Alliance, whose other members are APL and Hyundai Merchant Marine. Through membership of the alliance, the lines are able allocate ships together on trade routes. This allows for increased participation on the route, which the lines would have been unlikely to accomplish alone. Via its membership of the New World Alliance, MOL is now one of the six members of the G6 Alliance, which work together on the Asia-Europe trade route.
Unsurprisingly, considering its base in Japan, MOL also boasts considerable exposure to the intra-Asia trade route, an area that offers high growth potential and where we believe the carrier is well placed to expand upon and increase its market share.
MOL is also seeking a greater role on other emerging routes, with BMI highlighting Latin America and Africa as potential high-growth regions to which it will wish to increase its exposure. In the case of Africa, MOL has been upping its activity, partnering with other lines for a new Asia-East Africa service, Europe-West Africa service, and joining a service from Asia to South Africa.
MOL's expansion strategy in the South American container shipping sector is twofold. From July 2011 through to 2012 it increased its capacity on its Asia-East Coast South America Service (CSW). A total of 10 new 5,600TEU vessels were placed on the route over this period. The vessels have been designed to navigate the shallow-draft ports in South America. MOL also increased the number of vessels it operates on its CSW service from 12 to 13.
To further increase its exposure to the Latin America box market, MOL increased capacity on its CX1 feeder service. The service offers a rotation of Manzanillo (Panama), Manaus (Brazil), Vila do Conde (Brazil) and Manzanillo. MOL replaced its current vessels on the route, which have a capacity of less than 1,000TEUs, with four ships of 1,700TEU capacity.
BMI believes MOL's two-pronged South America strategy is a wise move. The company first and foremost seeks routes that offer high growth potential and are also somewhat sheltered from the problems of overcapacity, which are forcing down rates. The line's upgraded direct route and feeder service display its desire to offer fully integrated box operations in South America.
To complement MOL's container shipping operations, the larger MOL Group has invested in container terminals at Tokyo, Yokohama, Osaka, Kobe, Laem Chabang, Los Angeles, Oakland and Jacksonville. These facilities, at some of the world's busiest ports, ensure MOL's container services have priority access. This strategy is forward-thinking, having invested in the new Cai Mep Port in Vietnam, a country that is quickly developing into the 'factory of Asia', and is playing an increasing role in Asia-Europe services.
FleetAccording to AXS Alphaliner, the firm currently operates 110 vessels with a 506,239TEU capacity. The fleet make up is fairly evenly split between chartered, accounting for 51.6%, and owned tonnage. This allows MOL flexibility during periods of declining demand, as it is able to return chartered vessels to their owners when charter periods are up. In terms of vessel ownership, the company has developed a fleet of 41 vessels, with a capacity of 245,178TEUs, offering an average capacity of 5,979TEUs. The firm is happier to charter in smaller tonnage, with chartered vessels numbering 69 - a capacity of 139,943TEUs.
In terms of vessel size MOL operates a diverse fleet, the largest of which (8,000TEUs) are in operation on its Asia-Europe and trans-Pacific services. Its smallest tonnage, at just 700TEUs, operates on the carrier's feeder network.
MOL's order book is at 17.2% of its current fleet. It currently stands at seven vessels, with a total capacity of 87,200TEUs. The company is set to join the 13,000TEU club in 2014.
H1 FY2013 (April - September 2012)
MOL has remained in the red for its H1FY 2012 results period, which runs from April to September. Despite recording a 7.4% increase in profit over this period of JPY303.7bn, up from JPY282.7bn in the same period in 2011, MOL's container operations recorded a JPY2.6bn loss. It should be highlighted however that this loss, while keeping MOL in the red, was an improvement on the JPY10.5bn loss which the box unit posted in the same period in 2011.
Q1 FY2013 (April-June 2012)In the first quarter of FY2013 (ended June 30 2012) MOL made a net loss of JPY5.02bn. Though this is less than the JPY8.05bn made in the corresponding period in 2011 it will still be disappointing for MOL, and will impact upon the company's balance sheet.
FY 2012 (Ended March 31 2012)For the financial year ended March 31 2012, MOL made a net loss of US$316.45mn, or JPY175.73bn. Revenue was US$17.46bn, or JPY1,435.22bn; 0.07% down from the previous year.
Q3 FY2012 (September-December 2011)MOL posted another loss in Q3 FY2012 with a net loss of JPY25.14mn (US$323,400), down from the company's net profit of JPY56.08mn in the same quarter last year. The company's revenue slipped 9.3% year-on-year (y-o-y) to JPY1.07trn. The company blamed the loss on the rapid increase in the bunker price, which for the first nine months of MOL's financial year increased by US$181 per metric tonne.
On the back of yet another quarter of losses, MOL has projected that it will post a full-year net loss of JPY29bn.
H1 FY2012 (April-September 2011)MOL's container unit posted a US$143mn loss in the first half of its 2012 financial year (April 2011-September 2011). The company's revenue stood at US$3.6bn.
FY2011 (Ended March 2011)MOL cut its projected financial outlook for the fiscal year ending March 31 2011 after a deterioration in the global container shipping sector and slowdown in its non-liner businesses. MOL expected to post a loss of JPY17bn (US$0.22bn) for the April-September 2011 period, which it attributed to a JPY8bn (US$0.104bn) extraordinary loss in stock markets, falling Asia-Europe and trans-Pacific freight rates, a slowdown in the tanker market and currency appreciation.
FY2010 (Ended March 2010)MOL's container operations accounted for 38% of the group's total revenue in FY10. Its box revenue increased by 25.96% y-o-y to JPY587bn for the financial year. The increase was driven by cost-saving initiatives used throughout 2010, an uptick in rates during the first half of 2010 and an increase in container volumes.
In FY10 MOL's largest route was the trans-Pacific, where it handled 902,000TEUs. Liftings on the route were up 12.5% y-o-y. To cater for this increase MOL based more capacity on its trans-Pacific services, raising capacity from 991,000TEUs in FY09 to 1.24mn TEUs in FY10. However, this increase in capacity has led to a slip in utilisation. Utilisation on the eastbound leg of the journey dropped to 90%, from 91% in FY09, while utilisation on the westbound leg dropped to a paltry 55% in FY10, down from 71%.
Liftings on its Asia-Europe services were up considerably, from 543,000TEUs to 669,000TEUs, a y-o-y increase of 24.9%. Capacity increased in line with this, up 22.4% y-o-y from 684,000TEUs in FY09 to 837,000TEUs in FY10. On the westbound leg of MOL's Asia-Europe services it correctly judged demand with utilisation of 100%, up from the 95% utilisation ratio in FY09. On the return journey, however, utilisation levels slipped from 65% to 60%.
Pushing Up Reefer Rates
MOL has joined its peers in scheduling a rate increase on its refrigerated cargo. The initiative was discarded by Maersk Line, which announced that rates on reefer routes had not kept up with inflation and bunker costs and so it would seek to push up reefer rates from January 1 2013. MOL, along with a number of other container lines, is joining this push with a plan to increase reefer rates by US$1,500 per TEU.