TOKYO -- Daiichi Chuo Kisen Kaisha filed a request for civil rehabilitation proceedings with the Tokyo District Court Tuesday, after the fleet expansion undertaken during China's resource boom in the 2000s came back to haunt the company when the market slumped.
The venerable Japanese maritime shipper, founded 120 years ago, reported total liabilities of 176.4 billion yen ($1.46 billion), including those of one subsidiary, though that figure could grow. The Tokyo Stock Exchange announced Tuesday that the stock will be delisted Oct. 30.
"Our measures to expand our fleet backfired," President Masakazu Yakushiji told a news conference Tuesday. He will step down once the company has prospects for getting back on its feet, he said.
Major maritime shippers such as Mitsui O.S.K. Lines -- Daiichi Chuo's top shareholder with a roughly 16% stake -- and Nippon Yusen generally handle a wide range of business, including tankers and car carriers. Daiichi Chuo was an exception, specializing in bulk cargo such as coal and iron ore.
Former President Saburo Koide, who assumed the post in 2009 after serving as executive vice president of Mitsui O.S.K., sought to expand. He grew Daiichi Chuo's fleet from 162 ships in fiscal 2008 to 232 in fiscal 2011. But a slump in shipping demand created a glut of vessels, weighing on freight rates. As a result, the company has been in the red since fiscal 2011, reporting group net losses each year.
Yakushiji took steps to downsize after taking the helm in 2012. He sold ships owned by Daiichi Chuo, bringing the company's fleet to 172 vessels in fiscal 2014, down about 60 from the peak. This spring, he asked ship owners to lower charter fees by 20%. He believed the company could survive if the market recovered.
But worries surfaced about an economic slowdown in China, confounding his calculations. Daily chartering rates slid to a seven-year low of around $2,600 in March, well below the $20,000 to $25,000 considered the break-even point for large vessels. Ship owners scrapped unprofitable vessels in summer, helping to lift the figure back up to nearly $20,000.
However, China's peaking crude steel production, among other factors, has left the outlook for freight traffic dim. Although the October-December quarter is typically busy for bulk shippers, daily rates are still hovering around just $14,000 or so. The more freight Daiichi Chuo carries, the more money it loses. Yakushiji met this month with top Mitsui O.S.K. officials to seek support but was told the company could do no more.
Daiichi Chuo has no plans regarding sponsors at this time, Yakushiji said. Many of its charter contracts will be canceled as part of the restructuring process. A number of ship owners are small and midsize Japanese businesses that could suffer from Daiichi Chuo's bankruptcy.