Japan Feature

Japanese shipowners have had some tough decisions to make in the wake of financial crisis in the area.

JapanÕs merchant fleet stands at 2,021 vessels (around 67 million dwt) with 70 per cent of vessels being under ten years old. In 1997 the 12 oceangoing shipping companies listed on the Tokyo stock exchange increased operating profits by 31.4 per cent to Yen122 billion ($1 .1 billion). Then came the financial crisis in the Far East and the slowing of world trade.

In April last year Nippon Yusen Kaisha (NYK) merged with Showa Line to form a fleet of 545 vessels (200 directly owned). With the fleet covering many different sectors it needed to get some idea of how the financial situation would unfold. This task fell to its research group which produced a report last OctoberŠ it did not make comfortable reading. The report predicted that the required tonnage in the dry bulk market would drop from 210 million dwt in 1997 to 207 million dwt at best, or 202.5 million dwt in the worst case, in 1998. Mid-range predictions for 1999, 2000 and 2001 are 207, 210 and 213 million dwt respectively. This would mean surplus tonnage levels of 60 to 56 million dwt until the end of 2001 Š not the best outlook for freight rates. Another large Japanese shipowner, Mitsui OSK, is also now in the process of merging Š this time with Navix Šwhich will bring its fleet to over 500 vessels, but it only directly controls ten LNG carriers. The fleet is young, with the average age of seven years for VLCCs, eight years for bulkers, while the oldest are container ships at ten years.

Japanese shipbuilders are suffering from the effect of the strong yen and the weak won combined with depressed freight rates.

The slowdown in the world economy has caused many of JapanÕs shipowners to reduce their newbuilding programmes and, in the latter part of the year, Korean yards have been winning most international contracts. As a result JapanÕs orders book shrank from 450 vessels at the end of 1997 to 373 at the end of last year (although the gross remained 18.6 million tonnes). Over the same period Korea saw its orderbook rise by 1.4 million tonnes to stand at 19 million gross (299 vessels).

This has made Japanese shipyards uneasy. Some still have slots for 2000 deliveries says Motoi Utsunomiya, managing director of the ShipbuildersÕ Association of Japan. He highlights currency fluctuations as the most critical factor, but expresses concern over the economic situation Š especially in Asia. There is little encouragement for owners to place orders, concludes Mr Utsunomiya.

Japanese shipyardsÕ costs are almost 100 per cent in yen, with domestic manufacturers supplying almost all of the equipment.

One of the largest single costs for most newbuildings is the main engine, and in Japan Mitsubishi takes a quarter of the low-speed market with its UE range. On a worldwide basis this figure drops to about 10 per cent as the company has only exported (or will export) 41 engines for installation by foreign yards (Japanese yards have installed 26 engines in export ships).

The UE range does not have any offerings above 85cm bore, and there are no plans to add larger engines to the portfolio says Ryoji Nakano, project manager in the diesel engine design department. However, he says the UEC-LSE concept is likely to be extended across the range.

In the auxiliary engines market Daihatsu says it captures between 40 and 45 per cent share for Japanese built vessels. Eighty per cent of the 600 engines produced in 1997/1998 were destined for marine use. The current DK range has 20, 28, 26, 32 and 36cm bore versions. All but the 32 include a ?cylinder protect ringÕ (piston cleaning/fire ring) explains Teruo Goto, general manager of the technical administration department.