By Chris Cooper and Kiyotaka Matsuda
(Bloomberg) — Kawasaki Kisen Kaisha Ltd., Japan’s third-largest shipping company, plans to halve the fleet of its smaller bulk ships, a person with knowledge of the plan said.
Kawasaki Kisen, which owns about 100 Panamax- and handymax-sized ships, plans to make the reduction by returning vessels to shipowners, the person said, declining to be identified as the information hasn’t been made public. The shipping company is willing to pay breakup fees to owners for handing back the vessels early, the person said. Kiyoshi Tokonami, a company spokesman, declined to comment.
Shipping companies, including Kawasaki Kisen and Pacific Basin Shipping Ltd., have reported lower profits or losses in recent years as slowing demand for iron ore, coal and other commodities caused rates to slump. Excess capacity of vessels also led to the Baltic Dry Index, a measure of what shipowners earn from transporting commodities, dropping to a record low in February.
Kawasaki Kisen has already reduced its fleet of capesize vessels, the person said.
Ships carrying different types of commodities are categorized by capacity, with capesize being the largest, followed by Panamax and handymax. All three are smaller than very large ore carriers, known as VLOCs, which only haul that commodity.
Kaswaski Kisen rose 0.9 percent to close at 234 yen in Tokyo trading Thursday. The stock has fallen 10 percent this year, compared with a decline of 11 percent for Japan’s Nikkei 225 Stock Average.
The company reported a preliminary net loss of 50 billion yen ($457 million) for the year ended March, partly because of impairment losses on dry bulk ships. The person predicted Kawasaki Kisen would post a profit this fiscal year.
Kawasaki Kisen operates 375 bulk carriers, 70 container vessels and 49 ships to haul oil and gas, according to its website.
The Baltic Dry Index has almost doubled since the record low in February, as shipping companies scrapped about 13 million metric tons of bulk ships in the first quarter, according to Bloomberg Intelligence.
–With assistance from Kyunghee Park.
© 2016 Bloomberg L.P