MOL halts new orders for ore carriers

Mitsui O.S.K. Lines Ltd. (MOL), the world?s largest operator of iron-ore carriers, has halted orders for new ships as demand for steel drops. The company is scrapping up to seven iron-ore carriers and may not renew long-term charter contracts, Masafumi Yasuoka, a senior executive officer at the shipping line, said.

The Tokyo-based carrier had planned to increase its fleet of iron-ore carriers by 28% over six years to 160. “We may fall slightly short of the target,” said Yasuoka. “We?re putting new ship orders and decisions about contract renewals on hold.” He declined to say by how many vessels it may fall short of its goal.

MOL forecasts profit will decline for the first time in seven years in the business year ending this month as shipping rates have tumbled. It made over 90% of its operating profit from transporting commodities and cars last fiscal year. Net income will drop 32% to 130 billion yen ($1.3 billion), it said in January, reversing an earlier prediction for an increase.

The shipping company is also is suffering from plunging demand for cars made by Japanese car makers who are slowing production and using less steel. Toyota, the world?s biggest carmaker, will slash domestic production of vehicles 54% this quarter and Nissan Motor Co. aims to cut 20,000 jobs as it trims output worldwide.

MOL is also studying the effect of new iron-ore ships being launched this year and next to decide whether there will be an oversupply of such vessels, Yasuoka said. Coal, ore and grain transporters with a combined carrying capacity of 294.8 million DWT are currently on order at shipyards worldwide, according to data from London-based Drewry Shipping Consultants Ltd. That?s equal to 70% of the present fleet. Most of the new capacity, 38%, will be delivered next year.

MOL currently has on order 53 iron-ore carriers as part of its fleet-expansion and has no plans to cancel these orders.