The President of Japanese carrier NYK has warned that a widening gulf between supply and demand will hit shipping line profits over the coming years.
Yasumi Kudo (pictured above) said he expected demand growth on services from Asia to slow from previous levels because of an ageing and dwindling population in Europe.
He was more positive about Asia-US trade, which he believed would benefit from population growth, but said the majority view was that cargo traffic growth in the west would be around 5% a year in the near future.
Kudo was also positive about cargo within Asia – predicting double-digit growth – but NYK research had suggested global growth to be around 7-8%, compared to container fleet growth of 10%.
He said: "This leaves a widening gap between demand and supply, for which we have to be prepared for some years to come."
NYK expected to post a profit of ¥80 billion (US$973 million) for 2010, but Kudo warned profits had weakened in the latter half of last year.
This was caused by seasonality (slack season), but chiefly, the loosening gap between supply and demand, he said.
"We have to be ready to see this trend continue into fiscal 2011, if so, our profit will very likely drop below that of fiscal 2010," Kudo said.
He said carriers had learned that to keep freight rates at the required level, they must remove capacity to balance supply and demand.
But carriers would not be able to benefit from an extremely tight supply-demand scenario, as they had in the first half of last year, meaning profits would not be as high as in this period.
"We need to be prepared to see future profit levels dip below those of the first half of last year," he said.
The anticipated drop in first-half 2011 profit was expected to be compensated by NYK's logistics and non-vessel operating common carriers (NVOCC) business.
Kudo said: "The business of Double Wing Express (DWE), is on the rapid rise, which is expected to contribute greatly to our profits.
"Moreover, in the Asia region, the central pillar of our profits from logistics, we have managed to take advantage of the rapid growth in automotive logistics business in a timely manner, thanks to anticipatory investment, as the segment is one of our strengths."
Yasumi Kudo (pictured above) said he expected demand growth on services from Asia to slow from previous levels because of an ageing and dwindling population in Europe.
He was more positive about Asia-US trade, which he believed would benefit from population growth, but said the majority view was that cargo traffic growth in the west would be around 5% a year in the near future.
Kudo was also positive about cargo within Asia – predicting double-digit growth – but NYK research had suggested global growth to be around 7-8%, compared to container fleet growth of 10%.
He said: "This leaves a widening gap between demand and supply, for which we have to be prepared for some years to come."
NYK expected to post a profit of ¥80 billion (US$973 million) for 2010, but Kudo warned profits had weakened in the latter half of last year.
This was caused by seasonality (slack season), but chiefly, the loosening gap between supply and demand, he said.
"We have to be ready to see this trend continue into fiscal 2011, if so, our profit will very likely drop below that of fiscal 2010," Kudo said.
He said carriers had learned that to keep freight rates at the required level, they must remove capacity to balance supply and demand.
But carriers would not be able to benefit from an extremely tight supply-demand scenario, as they had in the first half of last year, meaning profits would not be as high as in this period.
"We need to be prepared to see future profit levels dip below those of the first half of last year," he said.
The anticipated drop in first-half 2011 profit was expected to be compensated by NYK's logistics and non-vessel operating common carriers (NVOCC) business.
Kudo said: "The business of Double Wing Express (DWE), is on the rapid rise, which is expected to contribute greatly to our profits.
"Moreover, in the Asia region, the central pillar of our profits from logistics, we have managed to take advantage of the rapid growth in automotive logistics business in a timely manner, thanks to anticipatory investment, as the segment is one of our strengths."