Marine Log - November 2008 - (Page 41)

CEOFORUM OUTLOOK ON SHIPPING AKIMITSU ASHIDA, PRESIDENT MITSUI O.S.K. LINES Ship operators are already lowering their company’s earnings expectations in the wake of the global economic downturn. Case in point are Japan’s Mitsui O.S.K. Lines Ltd. and the United States’ Horizon Lines Inc. Both operate very different fleets in very different markets. Mitsui O.S.K. is one of the largest ship operators in the world, with a diverse fleet of iron ore carriers, wood chip carriers, crude oil tankers, product and chemical tankers, LNG and LPG carriers, car carriers and containerships that operate worldwide. By contrast, Horizon Lines Inc., operates liner services in the U.S. Jones Act market, providing vital services to Hawaii, Puerto Rico, Alaska and Guam. We thought it would be insightful to hear what their CEOs are saying about the remaining outlook for shipping in 2008. Amid economic downturn, Japanese operator lower earnings expectations onsolidated financial results for the first half of FY2008 (six months) showed revenue of 1,094.8 billion yen, operating income of 164.6 billion yen, ordinary income of 186.0 billion yen, and net income of 124.0 billion yen. Revenue and all profits for the second quarter marked record highs. Revenue for the six months ending September 2008 for Fiscal Year 2008 was 1095 billion yen as compared with 940 billion yen in the same period in Fiscal Year 2007. Ordinary income was 186 billion yen in 2008 as compared with 144 billion yen in the same six months in 2007. Bulk ship revenue for the April to September time frame in FY 2008 was 171 billion yen as compared with 126 billion yen in 2007. Net income for the six months in FY 2008 was 124 billion yen as compared with 87 billion yen in the same period in 2007. During the second quarter of the fiscal year (three months), the financial crisis beginning in the U.S. and the economic impact spread to Europe and other nations around the world. The dry bulker market remained a firm tone in July, but www.marinelog.com C began to fall before and after the Beijing Olympics opened. The charter market for Cape-size bulkers dipped to about onefourth of the level we saw at the end of June. While the VLCC market showed volatility throughout the quarter, the petroleum product tanker market was in a strong position from beginning to end. In the containership business, seaborne trade on the key East and West route was lower than forecast and the freight rate level on the westbound European route weakened, due to a deteriorated fleet demand/supply balance. As a result, performance in this segment stagnated. Bunker prices, which had increased continually for several years, eventually began to decline after peaking in July, in line with overall resource prices. OUTLOOK FOR FY2008 The dry bulker market is sinking fast in step with declining stock markets and falling commodity prices since the beginning of October. We expect the market to undergo a continued correction for some time to come. However, a considerable share of our dry bulkship fleet sails under medium- and long-term contracts which are not affected by market trends, so we will see only a limited effect on our profit structure. In addition, we forecast continued firmness in the petroleum product tanker market, and anticipate that stable earnings in the LNG carrier and car carrier segments will support our performance. Speaking of the containership business, which turned to red ink during the second quarter, we already responded to the reduced shipments by taking steps to reduce tonnage on the North America and Europe routes, in line with slowed down movements of cargoes. Furthermore, bunker prices have been settling down, so we expect improved profits in this segment during and after the third quarter of FY2008. NOVEMBER 2008 MARINE LOG 41 http://www.marinelog.com

Table of Contents Feed for the Digital Edition of Marine Log - November 2008

Marine Log - November 2008 Contents Editorial Second Thoughts Update Inside Washington Looking Back at 130 Years Generation NeXt What's Ahead? Media Kit 2009 Defying the Naysayers Rampant Piracy Takes Shipping Hostage The Last Chapter of the New Carissa International Workboat Show Preview Newsmakers Tech News Contracts Events Website Directory ML Buyer's Guide ML Marketplace Marine Salvage

Marine Log - November 2008

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