Yasumi Kudo repeated his previous message about the need to slim down NYK's dry bulk carrier fleet. Photo: PA Overcapacity persists even though shipping is in demand, NYK president Yasumi Kudo said today.

In his new year message, Kudo said, "While the demand side is maintaining an expansionary tone, supply pressure in shipping capacity remains deeply rooted, particularly in terms of container ships and bulk carriers. As a result, we are unlikely to see any resolution of the overall gap in supply and demand in the short term.

"Possible factors affecting this include the increasing demand to replace fleets with more fuel-efficient vessels due to rising fuel oil costs, and the expansion in ship construction for investment purposes due to low interest rates and excessive capital worldwide."

Kudo said the business environment was becoming increasingly uncertain, with geopolitical risks in the Middle East and Ukraine, the risk of changing climate patterns causing major natural disasters, and instability in exchange rates and oil prices.

In response Japan-based shipping company NYK has reduced the number of its vessels by more than 20%, from 131 ships at end-March 2004 to 101 ships at end-March 2014. This was the result of optimising fleet size in line with the restructuring of alliances and service routes.

Kudo said, "These measures have enabled us to improve efficiency in fleet management, including upgrading to larger vessels and the associated disposal of ageing ships and ships with poor fuel economy."

Kudo repeated his previous message about the need to slim down NYK's dry bulk carrier fleet.

In response to the rapid growth in China's dry bulk imports in the mid-2000s, NYK's fleet of Capesize bulkers and Panamax and Handysize bulkers nearly doubled, from 71 and 145 respectively as of end-March 2004 to 129 and 286 as of end-March 2014.

Kudo said, "Unfortunately, however, there is a large gap in supply and demand capacity in the current dry bulk market, and we believe that aligning this will require significant time.

"This means that we must work toward quickly closing the gap between cargo contract periods on the income side and vessel holding and charter periods on the expenses side to convert to a business structure less vulnerable to market fluctuations."