Economic crisis cuts into K-Line earnings

PUBLISHED : Monday, 16 November, 1998, 12:00am
UPDATED : Monday, 16 November, 1998, 12:00am

Due to a decline in Asian imports and freight rates in the North American and European services, income for the six months to September 30 at Japan's K-Line fell slightly to 1.53 billion yen (about HK$95.58 million) compared with a year earlier.

Turnover was 208.06 billion yen, up 9.97 per cent from the period a year ago.

K-Line said attempts had been made to bring down costs and expenses and to effect rationalisations on each service route.

Despite these efforts, the level of container business ended at slightly lower than a year ago.

K-Line's cargo movement to the United States from Asia was extremely steady and freight rates had been partly restored.

In the opposite direction, cargo movements to Asia from the US had dropped due to the economic crisis in Asia and competition for cargoes brought freight rates down.

The difference between east-bound and west-bound cargo volumes on both these routes widened and resulted in a need for empty containers to be returned from the US to Asia.

The company said exports from Asia to Europe had been strong while imports to Asia from Europe had been weak.

K-Line said cargo movements in the intra-Asia trade could not recover due to the economic crisis in Asia and Japan's stagnant economy.

The line, therefore, had to take every pre-emptive rationalisation measure possible to cope with the sharp decline in cargo movement on the Japan-Bangkok route, it said.

In the general dry-bulk sector, although the market for large bulk carriers had been comparatively firm during the last fiscal year, it had started to become softer from early 1998.

The company said this was due to a fall in purchasing power caused by the devaluation of currencies in the Asian countries and a fall in production of crude steel by Japan.

The US Gulf-Japan, a main freight index, had fallen to an 11-year low US$12, indicating the market for medium bulk ships had deteriorated, it said.

Overall, the bulk-carrier market, including small bulkers, operated on a low key.

K-Line said under such difficult conditions, the company tried to secure long and short-term cargo contracts, restructured the alignment of its fleet and improved the efficiency of its ship operation.

In the car-carrier services sector, K-Line said Japan's exports continued to be favourable because of the lower Japanese yen.

It said it had concentrated on operational efficiency by chartering vessels on a short-term basis when the need arose.

It also forged ahead in cross-trade and importation of cars into Japan.

Due to this modus operandi, K-Line was able to handle more vehicles during the review period than in the previous corresponding period.

It said the market for oil tankers continued to be relatively firm due to active cargo movements in this trade, supported by a decline in crude-oil prices.

The market for oil-product carriers was slack due to a stagnation in demand, it said.

Due to a fleet alignment, K-Line's liquefied natural gas carrier services improved earnings slightly, the company said.