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Overseas demand to aid Nippon Yusen

(China Dail/Agencies)
Updated: 2010-02-25 10:30

TOKYO: Nippon Yusen KK, Japan's largest shipping line, will be increasingly reliant on shipping iron ore and coking coal to China as it expands its fleet as domestic growth stagnates.

China may account for half of the iron ore and coking coal the company ships by 2015, up from 20 percent now, according to Kazuo Ogasawara, general manager of the capesize bulker group at the Tokyo-based company. Japan may account for less than 40 percent, compared with 60 percent now, Ogasawara said.

"We'll just have to expand our commercial zone in China and India where demand is growing," Ogasawara said in a Feb 22 interview in Tokyo.

Nippon Yusen is targeting mills in the world's fastest- growing major economies as domestic demand for steel has waned amid cutbacks in public spending and corporate investment.

Nippon Steel Corp, Japan's largest mill, lost its rank as Asia's largest steelmaker as it was overtaken by mills including China's Hebei Iron & Steel Group and Baosteel Group Corp, and South Korea's Posco last year.

The shipping line plans to expand its fleet of capesize bulkers, used to transport iron ore and coking coal, to 110 vessels by the end of 2012 from 85 now, Ogasawara said. The company's plans to increase its total bulk fleet, including oil tankers and liquified natural gas carriers, to 580 by March 31, 2014, the company said in October. It had 492 vessels in operation as of the year ended March 31, 2008.

Nippon Yusen has risen 15 percent this year on the Tokyo Stock Exchange. The company, which sold 111 billion yen in new stock for the fleet expansion last December, was the fifth-worst performer on the Nikkei 225 Stock Average in the past 12 months, dropping 20 percent.

Chinese contracts

The company has contracts with Chinese steelmakers including Baosteel and Wuhan Iron & Steel Group. The company also owns a joint venture with Tata Steel Ltd to carry bulk cargo to India.

Yusen's bulk shipping segment, which includes iron ore and coking coal transportation, is the biggest contributor to its earnings, five times the level of the total as the company incurred losses on the divisions of container shipments and air transportation.

It reported a 14.3 billion yen ($159.3 million) in pretax profit from operations for the quarter ended Dec 30.

China, which accounted for half of the world's steel output, last year increased iron ore imports by 42 percent to a record 628 million tons. Japan imported 105.5 million tons of iron ore in 2009, down 25 percent from a year earlier, according to a Jan 29 report by the Ministry of Finance in Japan.

Crude steel output in Japan, home to Nippon Steel and JFE Holdings Inc, fell 26 percent to the lowest in 40 years in 2009, according to data from the Japan Iron and Steel Federation.