MOL halts iron-ore carrier orders

Mitsui O.S.K. Lines (MOL), the world’s largest operator of iron-ore vessels, halted new orders for the 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 in an interview in Tokyo recently. Mitsui O.S.K. may slow its expansion plans as economic growth in China, the world’s biggest steelmaker and buyer of iron ore, expanded at the slowest pace in seven years last quarter. 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. The shipper also is suffering from plunging demand for automobiles and transporting fewer cars made by Toyota and other Japanese automakers, who are slowing production and using less steel.

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. Coal, ore and grain transporters with a combined carrying capacity of 294.8 million deadweight tonnes are currently on order at shipyards worldwide, according to data from London-based Drewry Shipping Consultants. That’s equal to 70% of the present fleet and most of the new capacity, 38%, will be delivered next year.

Mitsui O.S.K. has already ordered 53 new iron-ore carrying ships as part of fleet-expansion and says it has no plan to cancel orders.