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The following is an excerpt from the New Year’s speech made by NYK president Tadaaki Naito as business opened for 2017 at the company’s head office in Tokyo.

 

I would like to wish everyone a happy New Year.

The year 2016 was a turbulent one for the maritime shipping industry as well as the world. The Baltic Dry Index hit record low levels in February, and then at the end of August, we witnessed the bankruptcy of Hanjin Shipping Co. Ltd. Meanwhile, international shipping traffic decreased due to the slowdown of economic growth in China, while the impact of the rush to construct new vessels was prolonged as a result of monetary easing policies. Consequently, the maritime shipping market remained sluggish throughout the entire year.

Last year marked a major turning point also for the NYK Group. The company posted a large sum in losses, and recorded a substantial decline in capital stock, which our predecessors worked so hard to accumulate. We need to be fully aware of the fact that shareholders are very troubled with our decision to not pay a dividend for the first time in 52 years. Furthermore, we have decided to integrate our container shipping business and international terminal business with those of two other major companies in Japan. Preparation for the integration will have a major impact on the entire group, so 2017 will be a year for bold steps toward positioning the NYK Group for the times ahead under our “Beat the Crisis” in-house initiative. I want everyone to achieve differentiation in day-to-day operations by staying half a step ahead in each area of business. I would like to speak about goals that have been set for this year at respective business headquarters and divisions.

 

< Global Logistics Services Headquarters >

The Liner Trade segment will continue to be our core business after the integration in April next year. Our objective for the joint-venture company is to maximize its competitiveness by drawing on the best practices and outstanding aspects of all three companies. We shall further enhance the effectiveness of our systems and operations by adopting the superior ones used at NYK.

The stable operations of the terminal business should continue, and I would like everyone involved to raise the competitiveness of the business in Japan by taking exhaustive steps toward improving its efficiency.

The logistics business will become a more strategically important part of our global logistics service. For the future, we need to expand the scale of this business and enhance its operations. I would like to see it grow as a core business for the NYK Group.

As for the air freight transportation business, all departments are requested to continue their coordinated efforts to enable and support flexible shipments in response to the market. I would like relevant personnel to explore new business models while focusing on ensuring the safety of air freight transport.

 

< Automotive Transportation Headquarters >

We expect current trends in the automobile industry to continue, specifically local production for local consumption, and production tailored to specific locations and output. I want personnel in relevant divisions to reorganize shipping routes with a fresh understanding of customers’ needs and to boost efficiency without being constrained by previously accepted practices.

Automobile logistics is a field in which we have pursued strategies for differentiating the NYK Group. Consequently, we have widely expanded this business ahead of other companies, establishing operations with good prospects in every region of the world. This year, we need to shift to cultivate each area of operations.

 

< Dry Bulk Division >

The dry bulk shipping market was extremely challenging in 2016, with demand falling to historically low levels. However, from early autumn, the market improved considerably. The charter market used to be solely dependent on indices. But factors such as safe and reliable transportation for customers are now recognized and reflected in the market. Since it is comparatively difficult to differentiate in this market, there is a great advantage to realize differentiation based on “creative solutions.” I am looking forward to getting to the next stage while making use of the experience we have gained thus far in Asia, which is still growing markedly.

 

< Energy Division >

We can expect future market growth for LNG, since it has a relatively low burden on the environment. Another round of new business is foreseen in various countries in Africa from 2020. Therefore, I want us to prepare for that next wave of growth with fresh ideas and awareness gained from our past experiences.

In the offshore business, our entry into the subsea EPCI segment enables us to offer service in each area of the supply chain. NYK needs to determine whether existing projects can actually be made into profitable businesses through sound management.

While market trends related to very large crude carriers, LPG tankers, and chemical tankers are distinct, I expect these operations to grow as businesses that can secure stable freight rates. I want everyone to maintain a broad perspective and pay close attention to market trends in this region so that we can differentiate our services and acquire new business in Asia where the demand for energy will rise.

 

< Cruise Business >

Last year marked the 25th anniversary of the commissioning of our Asuka cruise ship. To maintain this business, which brings happiness to people and offers a path for future expansion, I would like to ask everyone concerned in the cruise business to make a thorough study of the new business and the possibility of constructing a new ship, and produce relevant results that can be used in the future.

 

< General Affairs Headquarters, Management Planning Headquarters, and Technical Headquarters >

I want everyone in these headquarters to do what is necessary for this business integration so that we can maximize the competitiveness of the new company. As each of our sales divisions and group companies face intensifying competition, I would like the corporate divisions to apply creative solutions as means to support sales activities and bolster the Group’s competitiveness.

 

NYK will mark its 132nd anniversary in October of this year. NYK is one of Japan’s long-established companies, and also one of the few to operate for so many years without a name change. My mission is to ensure that the NYK Group has a sound corporate structure for the next generation of management and employees. I want us to envision the future of the NYK Group by pursuing two objectives.

 First, I would like for us to contemplate and craft a new medium-term management plan to commence in fiscal 2018, a plan that takes into account the integration of the container shipping business. Second, I would like us to focus on group management. That means, increasing the corporate value of the NYK Group by effectively utilizing and optimally deploying operational resources, including human resources, and overhauling our group-wide management structure.

In closing, I offer my wishes for a happy New Year filled with good health and prosperity for all NYK Group employees and their family members around the world.

NYK, the Mitsubishi Corporation (MC), Toho LNG Shipping Co., Ltd. (Toho LNG Shipping),* and Tohoku Electric Power Co., Inc. (Tohoku Electric Power) will participate in the joint ownership of a new liquefied natural gas (LNG) vessel for the Cameron LNG project in the U.S. through the jointly owned company Diamond LNG Shipping 3 Pte. Ltd. (DLS-3).**

In December 2015, MC reached agreement on a shipbuilding contract with MI LNG Company Limited,*** in addition to a heads of agreement for time-charter party with Diamond Gas International Pte. Ltd.**** Then in May 2016, MC established a vessel owning company, DLS-3, on the assumption of LNG vessel co-ownership with NYK, Toho LNG Shipping, and Tohoku Electric Power.

Since these four companies have received formal business approval by relevant authorities, NYK, Toho LNG Shipping, and Tohoku Electric Power now have an equity stake in DLS-3. The shipbuilding contract and the heads of agreement for the time-charter contract have thus been transferred by MC to DLS-3.

The new LNG vessel which will be built by Mitsubishi Heavy Industries Shipbuilding Co. Ltd.***** have a capacity of 165,000 m3, and be a "Sayaringo STaGE” carrier.****** Upon completion in 2019, the ship, which will be managed by NYK, will be assigned to transport LNG for Toho Gas Co., Ltd. and Tohoku Electric Power from the Cameron LNG Project located in the U.S. state of Louisiana. NYK and MC both have an equity stake in this project. 

As LNG demand throughout the world continues to grow, NYK will continue its efforts to promote the Cameron LNG project and provide stable and economical LNG transport services.

 

* Toho LNG Shipping Co., Ltd.

A wholly owned LNG vessel owning company of Toho Gas Co., Ltd.

 

** Diamond LNG Shipping 3 Pte. Ltd.

Established in Singapore for LNG vessel ownership and transportation of LNG. The company is owned by NYK (40%), MC (40%), Toho LNG Shipping (10%), and Tohoku Electric Power (10%).

 

*** MI LNG Company Limited

A joint venture established in April 2013 by Mitsubishi Heavy Industries Ltd. (MHI, equity ownership 51%) and Imabari Shipbuilding Co., Ltd. (49%) for designing and marketing new LNG carriers.

 

**** Diamond Gas International Pte. Ltd.

A wholly owned subsidiary of MC located in Singapore.

 

***** Mitsubishi Heavy Industries Shipbuilding Co., Ltd.

A wholly owned group company of MHI that focuses on the construction of merchant vessels in Nagasaki.

 

****** Sayaringo STaGE

A next generation LNG carrier that has a continuous steel cover over its spherical aluminum tanks and a hybrid propulsion system named STaGE (Steam Turbine and Gas Engines) which is developed by Mitsubishi Heavy Industries Shipbuilding Co., Ltd. The characteristics of the STaGE are the "Ultra Steam Turbine plant", a highly efficient reheating steam type marine turbine, and a dual-fuel diesel engine capable of operating on both gas and oil, which form a highly fuel efficient propulsion system.

The "Circle Japan Grand Cruise,” a luxurious one-month voyage operated by NYK Cruises Co., Ltd. (head office: Yokohama; president: Hiroshi Hattori), has been recognized with an Award of Excellence at the 2016 Cruise of the Year Awards* sponsored by the Japan Oceangoing Passenger Ship Association (JOPA).

This cruise was a new offering on Asuka II from June 5 to July 8, 2016, and was highly evaluated for its high occupancy rate of 85 percent despite its 33-day length. The early summer voyage circled Japan and even included a northern stop at Petropavlovsk-Kamchatsky in Russia and a southern visit to Keelung, Taiwan. A local production for local consumption policy, which resulted in good use of local food and collaborations with local chefs and restaurants at each port, was also praised. An attempt to make the cruise affordable to solo travelers was also successful with unaccompanied guests accounting for a quarter of all passengers.

On December 15, an awards ceremony was held in Tokyo, and JOPA chairman Naohiko Yamaguchi presented a plaque to Masahiro Arai, senior managing director at NYK Cruises Co., Ltd.

This year is the memorable 25th year of service by the Asuka cruise brand. The NYK Group will continue its efforts to offer creative cruise experiences that best meet the passions of its customers. 

* Cruise of the Year

An annual award presented by the cruise section of JOPA. The purpose of the award is to recognize companies which offer a notable cruise that has contributed to the development of the travel trade, thus increasing the motivation to produce attractive cruises and services for customers. This is the ninth year that the award has been presented. Awards of Excellence are given to recognize original cruises that attracted a significant number of customers, challenged new markets, and generate significant social attention.