NYK Line has significantly revised its profit forecasts for the financial year due to the impact of the prolonged Red Sea crisis on vessel earnings.
The Japanese shipowner now expects net profit for the second quarter to be 85.2% higher than its previous profit forecast in early May.
The company now projects a figure of ¥250bn ($1.59bn), significantly higher than the ¥135bn forecasted during its full-year results announcement.
For comparison, NYK Line’s net profit for the full financial year ending March 2024 was just ¥228.6bn, down 80% from the previous year.
“Due to the Red Sea situation, which has necessitated the use of the Cape of Good Hope route, container ship supply-demand tightness and freight rate conditions have exceeded our initial expectations,” NYK Line said.
“As a result, we expect an improvement in profit at our equity method affiliate Ocean Network Express, which operates a container ship business.
“In addition, taking into account the strong market conditions in the logistics business and the bulk shipping business, as well as the yen’s depreciation, the financial forecasts have been revised upward,” it added.
For the full year ending March 2025, NYK Line now expects its net profit to be 59.2% higher than earlier forecasts at ¥390bn.
However, container ship charter rates look to have peaked, with the Shanghai Containerised Freight Index recording its successive weekly decline, according to container shipping data provider Linerlytica.
“Any further escalation of the Red Sea crisis would have a limited impact on the container markets as only 14% of the ships currently deployed on the Asia-Europe trade is using the Suez Canal,” the data provider said.
“The share of the overall capacity is even smaller, as only 4% of the 7.48m teu deployed is using the Suez route as the majority of the carriers there are deploying smaller ships, with CMA CGM the sole exception as it retains a single Asia-Med service that is still on the Suez.”
Linerlytica said the recent decline in spot freight rates has “spooked the freight futures market” but it has not dampened charter market sentiment, with charter rates still rising on tight demand from carriers.
“The pace of new ship deliveries has also slowed, with the monthly growth rate declining to 0.5% from a peak of 1.2% a month ago with just 173,700 teu delivered in the past 30 days,” it added.
