Shape up or ship out

MOL CEO Junichiro Ikeda calls on divisions to prove their worth in tough markets.

MOL CEO Junichiro Ikeda has warned all divisions to prove their worth if they want to remain operational in tough shipping markets.

In his New Year address to workers, he said the Japanese group needs a new togetherness to overcome the serious challenges ahead.

"I call on each of you to help boost our competitive strength and meet our customers’ expectations.

"Furthermore, I want to make it clear that if a business does not have this kind of strength, we will need to question its reason for being.

"We must be willing to sweat together as we work to win the trust of our customers."

Ikeda said MOL's "business climate remains severe."

"Fleet oversupply is still an issue, and we see few prospects for recovery with the Chinese economy slowing down and markets stuck at historically low levels for both containerships and dry bulkers," he added.

"The drop in crude oil prices does provide a tailwind with the twin benefits of reducing bunker costs and spurring the tanker market.

"However, low crude prices also raise concerns of a slowdown in resource development, which could negatively impact our new LNG carrier and offshore business projects. In addition, we cannot realistically expect favorable conditions will go on forever in the tanker market."

Ikeda said shipping companies all over the world are fighting for their survival.

Instead of letting the market define MOL or limit its success, the company is "moving aggressively" to make the most of its competitive advantages, he added.

MOL slipped into the red at the halfway stage of its financial year following the collapse of Daiichi Chuo Kisen Kaisha.

It lost JPY 200m ($1.65m) after its first quarter profit of JPY 12.7bn was wiped out by a JPY 13bn loss in the second quarter.

The Japanese shipowning giant said it was forced to take an extraordinary loss of JPY 26.2bn on the value of its shares in Daiichi.