Japan’s Top Container Shipping Line Projects $600 Million Loss
Japan’s Top Container Shipping Line Projects $600 Million Loss
The merged Ocean Network Express business says technology ‘teething problems,’ staff shortages weighed down carrier in a sagging shipping market
Japan’s Ocean Network Express, one of the world’s largest container shipping operators, faces a $600 million loss in its first year in operation as it struggles with a new information technology, staff shortages and a rapidly rising fuel costs.
The shipping line known as ONE was formed in April after Japan’s three biggest shipping companies—Mitsui O.S.K. Lines, Kawasaki Kisen Kaisha 9107 -14.37% and Nippon Yusen Kaisha 9101 -6.04% —pumped $3 billion to merge their container operations. The company had originally forecast a $110 million annual profit.
The company largely missed the early summer season in trans-Pacific services, when U.S. importers stepped up imports from Asia ahead of a series of tariffs launched between the U.S. and China.
It struggled with what it called “teething troubles” of a new IT system that led to booking delays and many angry customers switching to other operators. There were also staff shortages across the world as new teams were formed and employees were relocated from Japan.
“ONE sought to regain lost ground during the peak season from July to September, but (container) liftings and utilisation remained lower than the outlook because the negative impact remained on its main Asia-North America routes and intra-Asia routes,” the company said in a statement.
Container shipping lines more broadly are struggling with weak freight rates and excess capacity in major trade lanes. Maersk Line parent A.P. Moeller-Maersk A/S and Hapag Lloyd AG are among carriers reporting weak results in the first half of 2018, in part because of fuel costs and shipping prices.
ONE Chief Executive Jeremy Nixon said the carrier’s launch issues are now resolved, but ONE is struggling with higher fuel prices, which it will to pass on to already-unhappy cargo owners.
‘ We are trying to pass on the fuel charge to customers, but we are not doing it very effectively. ’
“Fuel went from $350 a (metric) ton in March to around $460 now, and potentially heading higher. We burn about 4.4 million tons of fuel a year and saw our cost base go up over $450 million,” Mr. Nixon told The Wall Street Journal in an interview earlier this month in Hong Kong.
The broader shipping industry faces an additional $40 billion energy bill as carriers and fuel providers meet new rules taking effect in 2020 requiring them to burn cleaner fuels.
“The current forecast is $220 more per ton, on top of what we got now,” Mr. Nixon said. “It’s a very significant increase and there will be a premium in freight rates. We are trying to pass on the fuel charge to customers, but we are not doing it very effectively.”
