Japan's shippers expect profit boost in fiscal 2015
TOKYO -- Japanese marine transporters and air carriers likely will reap gains from cheap crude prices, with pretax profit for next fiscal year rising by as much as 30 billion yen ($244 million) in some cases.
The drop in oil prices that began last fall is a boon to these companies that guzzle fuel oil. C-heavy oil -- fuel oil used for ships -- is trading around $350 per ton, 40% cheaper than during a recent peak in June 2014. Since shippers routinely buy two to three months' worth of oil in advance, most of the fuel used starting this spring will be cheaper.
Oil-induced profit would soar to 30 billion yen at Nippon Yusen and Mitsui O.S.K. Lines for the year ending March 2016, if fuel prices remain at current levels, and the figure for Kawasaki Kisen would come to just over 20 billion yen.
Nippon Yusen expects pretax profit of 72 billion yen for the year ending March 31. Estimates for Mitsui O.S.K. and Kawasaki Kisen are 41 billion yen and 48 billion yen, respectively.
If the Dubai crude oil price -- the benchmark for Asia -- stays around the current level of about $60 per barrel, Japan Airlines will see a lift in operating profit of as much as 7 billion yen in the January-March period. ANA Holdings anticipates an increase of around 3 billion yen.
But there are signs of uncertainty down the road. Freight rates for bulk shipping have sunk to historic lows amid an economic slowdown in China. Container shipping is brisk, particularly between Asia and North America, but the debut of new container ships next fiscal year likely will upset the supply-demand balance.
With these negatives offsetting gains from cheap oil, Nippon Yusen's group pretax profit could end up increasing by only around 20 billion yen. The increase is likely to be around 10 billion yen for Kawasaki Kisen. Mitsui O.S.K., currently weighed down by a fleet of low-margin container ships under long-term contracts, is expected to outgain the two rivals.
The oil boon will lose its shine at airlines. Income from fuel surcharges will decline amid low fuel prices. As a result, cheap oil will not translate into as much of a profit next fiscal year.