2014 "Very Severe Year" for MOL
Japanese shipping company Mitsui OSK (MOL) celebrated its 130th anniversary last year, but in his 2015 new years’ message President Koichi Muto conceded that the company’s business results are projected to be considerably less than the outlook forecasted at the beginning of that year. “In truth, we were tossed about by rough waves throughout, and it became a very severe year.”
The company’s containership division is showing a significant deficit for this fiscal term due to lower freight rates on Asia-South America East Coast routes, along with delays in the work to fully automate their U.S. terminal, despite increasing cargo volume, mainly on the East-West trade and considerable improvement in the business environment.
In the dry bulker division, a decrease in deliveries of newbuilding vessels, especially of Capesize bulkers, has tightened up the supply and demand balance. The market itself should see a strong recovery, but for nearly a year, it has remained sluggish overall, he says.
“There is a saying in the U.K. that “a smooth sea never made a skillful sailor”. That means that we grow and improve by overcoming difficult situations. We also have faced rough seas unintentionally, but we should be able to put the lessons we learned during rough times into practice when we face the next challenge. We need to get out of the doldrums as quickly as we can and move forward in a counteroffensive.”
While Muto anticipated increased petroleum production from the U.S. shale oil revolution, OPEC has not moved to reduce production, and oil prices have been plummeting. Also, the dollar has appreciated against the yen rapidly since September last year.
“For us, the depreciating yen and falling bunker prices, along with a decline in interest rates, are a strong following wind. So this year, we will pick up speed in the favorable wind of the cheaper yen and lower oil prices, increase our own power, and move ahead toward even greater achievements.”
Muto is aiming for solid growth in the next decade. “Every type of vessel should not depend on a market recovery; instead, we must reconstruct business so we can post higher profits without depending on market conditions, and that's what we are aiming for.
“In the LNG carrier and offshore business divisions, just over the last year we have signed long-term contracts for more than 10 vessels for shale gas transport to Japan and overseas projects. Through our participation in Yamal LNG project in Russia, we have launched an ambitious effort to operate ice class LNG carriers for the Northern Sea route, and our first LNG carrier built in China under our technical cooperation will be delivered soon.”
The company’s tanker division grasped the changes in cargo movement and moved into the shuttle tanker business, where demand is increasing as the offshore business grows. “We expect these new projects and businesses to generate highly stable profits and contribute to expanding our business domain. By moving aggressively into such growth areas, we will further expand the base of our businesses that bring us stable income and profit.”
The company is “somewhat behind” in the container ship business. “We have already taken steps to reform the business, such as upgrading the fleet with the world's largest containership – 20,000TEU – to make us more cost competitive. With global economic expansion, containerized cargo trade is certain to keep growing so the containership business, including container terminals, represents a growth opportunity. The true value of the company is determined how we can add value that our customers will appreciate, and come up with ways to enhance cost competitiveness.
“There is still a lot of room to improve profitability with advancement of operations and yield management,” he says. “Now is the time to be tenacious and move forward.”