Risk of Weak Shipping Market Conditions Due to Low Demand Growth and Excess Vessel Capacity

「The shipping market remained generally firm in the company-operated dry bulk, energy resource transportation and car carrier businesses, supported by steady cargo demand in each. In the container shipping business, market conditions remained below the previous year’s level due to the impact of newbuilding completions and other factors.」

「The large-vessel market softened at times following accidents and labor disputes at loading ports, but remained generally firm as cargo movements of iron ore and bauxite continued at solid levels and coal cargo movements also increased from July 2025. In the container shipping business, solid cargo demand was observed, including a sharp increase in cargo movements to North America in July 2025 due to front-loaded demand ahead of the implementation of reciprocal tariffs by the United States. However, short-term freight rates remained sluggish and fell through the end of September 2025 due to the impact of excess supply resulting from the continued high volume of newbuilding completions.」

「The performance of ONE, an equity-method affiliate of the Company, remained strong, supported by robust personal consumption and increased demand for tonnage due to the prolonged use of routes around the Cape of Good Hope arising from the situation in the Middle East and port congestion. Although freight market conditions have been trending downward since the Lunar New Year due to slower cargo movements and excess vessel supply, revenue and profit increased significantly year on year.」

「In the large-vessel market, demand for iron ore and bauxite transportation from the Atlantic region to East Asia remained firm from the beginning of the period. Although conditions temporarily softened due to a decline in iron ore shipments from Australia and other factors, the subsequent recovery in shipments and bad weather in the Far East tightened the tonnage supply-demand balance, and conditions remained generally firm. In the medium-sized and small-vessel market, the tonnage supply-demand balance loosened at times due to reduced shipments during the gap between South American grain harvests and recovering water levels in the Panama Canal. Nevertheless, conditions remained generally firm, supported by grain shipments from North America during the harvest season, coal demand from China and India, and steel transportation demand, among other factors. The Panamax market softened in the second quarter, however, as a bumper harvest in China caused South American cargo volumes to fall below initial expectations.」

「In the shipping market, within the company-operated businesses, dry bulk market conditions softened under the impact of the slowdown in the Chinese economy, while the energy resource transportation business remained stable and the car carrier business remained firm as strong cargo movements continued. Container ship market conditions softened due to increased newbuilding completions and a decline in cargo demand, but rose at the end of the period as supply chains tightened due to the situation in the Middle East.」

「In the dry bulk segment, despite concerns including uncertainty over the outlook for the Chinese economy, economic stagnation in Europe and the situation in the Middle East, the tonnage supply-demand balance is expected to tighten over the medium term against a backdrop of limited newbuilding completions. Dry bulk market conditions are therefore expected to remain generally firm, albeit with fluctuations. Tonnage supply and demand and freight market conditions have been affected by increased newbuilding completions and supply chain disruptions arising from the situation in the Middle East.」

「The large-vessel market softened as the tonnage supply-demand balance loosened due to the delayed recovery in China’s actual demand and the easing of vessel congestion, despite a temporary improvement in transportation demand for iron ore to China. However, it has recently turned upward, supported by expectations for a recovery in domestic steel demand in China, the seasonal recovery in demand for bauxite shipments from Guinea following the end of the rainy season, and other factors. The medium-sized and small-vessel market fell due to reduced coal and steel transportation to Europe and other distant destinations and weaker transportation demand to China as buyers held back following a decline in grain futures prices. It has recently turned upward, however, as vessel congestion increased with the full-scale recovery in grain transportation demand and vessel utilization rates were pushed down by factors including low water levels in the Panama Canal.」

「The large-vessel market temporarily entered a recovery trend amid expectations for an economic recovery in China. However, the delayed recovery in China’s actual demand and the easing of vessel congestion loosened the tonnage supply-demand balance, leaving conditions weak year on year. The medium-sized and small-vessel market also remained weak, due to reduced coal and steel transportation to Europe amid high inventories in demand areas and weaker transportation demand to China as buyers held back following a decline in grain futures prices.」

「In the shipping market, container market conditions softened temporarily due to a decline in cargo demand. However, stable cargo demand in the car carrier, dry bulk and energy resource transportation businesses, among others, allowed overall market conditions to remain stable.」

「In the dry bulk segment, market conditions fell in the second half amid numerous uncertainties, including concerns over global inflation and an economic slowdown and the timing of the normalization of economic activity in China. However, increased coal transportation demand resulting from the situation between Russia and Ukraine and limited newbuilding completions are expected to tighten the tonnage supply-demand balance, allowing market conditions to remain at a certain level.」

「The large-vessel market generally remained firm, albeit with fluctuations. While economic activity in China, a major demand center, stagnated and the easing of vessel congestion increased available tonnage, the subsequent recovery in transportation demand and increased congestion caused by bad weather in the Far East tightened the tonnage supply-demand balance.」

「In the dry bulk segment, transportation demand is expected to remain firm against a backdrop of normalized economic activity in China, while limited newbuilding completions are expected to tighten the tonnage supply-demand balance, keeping dry bulk market conditions firm. At the same time, we are closely monitoring the surge in resource prices resulting from the situation between Russia and Ukraine, the impact of global inflation on the real economy, and the impact of COVID-19 measures on the tonnage supply-demand balance, and are preparing to respond swiftly.」

「In the first half, transportation demand remained firm in China and other countries, and the large-vessel market generally remained at a high level as the tonnage supply-demand balance tightened toward the middle of the period due to strengthened quarantine measures to prevent the spread of COVID-19 and increased vessel congestion in the Far East. In the second half, market conditions softened under the impact of restrictions on crude steel production in China and reduced shipments due to bad weather in major iron ore and coal producing regions. Nevertheless, conditions remained generally firm throughout the year, despite fluctuations.」

「In the dry bulk segment, market conditions generally remained at a high level as supply and demand tightened, supported by stable transportation demand and the effect of reduced vessel supply due to vessel congestion and other factors, while the global economy continued to recover against a backdrop of fiscal support and economic stimulus measures in various countries. Toward the end of the fiscal year, risks to growth include a seasonal decline in transportation demand, the global spread of COVID-19 variants, and a slowdown in the Chinese economy, which has driven growth in the real economy. However, average market conditions for the full year are expected to significantly exceed those of the previous fiscal year.」

「The large-vessel market remained at a high level as strong transportation demand continued, quarantine measures to prevent the spread of COVID-19 were strengthened, and vessel congestion increased, particularly in China, a major discharge destination. Despite the impact of a hurricane that struck the Gulf Coast of Mexico at the end of August 2021, transportation demand for grain, coal and minor bulk cargo increased in the medium-sized and small-vessel market. This market also remained generally firm, affected by vessel congestion in China, as was the large-vessel market.」

「As a result, although the dry bulk segment as a whole worked to reduce operating costs, optimize fleet size and hedge market volatility risk using freight futures agreements (FFAs), the impact of weak market conditions, particularly in the first half, resulted in lower revenue than in the previous fiscal year and a loss.」

「The large-vessel market surged at the beginning of the third quarter, as strong steel demand in China was joined by a recovery in crude steel production in other major producing countries, increasing demand for tonnage. It subsequently fell sharply, however, as shipments declined due to bad weather and maintenance at Brazilian iron ore loading ports. Regarding the tonnage supply-demand balance, shipyard operations, which had declined due to the spread of COVID-19, recovered and newbuilding completions reached a high level. However, scrapping of medium-sized and small vessels did not progress, so the supply-demand gap did not improve.」

「In the dry bulk segment, market conditions are showing signs of recovery in the supply-demand environment for seaborne transportation, particularly of raw materials, supported by economic stimulus measures in various countries. However, as concerns remain over a resurgence of COVID-19 infections, particularly in Europe, a full-fledged recovery is expected to take some more time. During this period, speculative investment in vessels is expected to remain subdued, while the pressure from tonnage supply is expected to be kept low as the scrapping of older and uneconomical vessels increases following the implementation of environmental regulations. Market conditions are therefore expected to gradually recover, particularly for large vessels.」

「Market conditions for large vessels remained weak as the spread of COVID-19 and adverse weather conditions at production sites in Brazil caused global iron ore cargo volumes to stagnate. Cargo volumes bound for China, which remained firm, were concentrated on short-haul sources, resulting in a significant surplus of vessel capacity and weak market conditions.」

「In the second half of the year, large vessels were affected by declining iron ore shipments from Brazil, while medium-sized and small vessels were affected by slower grain shipments from South America and steam coal shipments to China. Toward the end of the period, all vessel types were affected by shrinking transport demand due to the spread of COVID-19, and market conditions remained weak.」

「For large vessels, vessel supply in the Atlantic increased as ships carrying non-compliant fuel oil made ballast voyages in the region ahead of the enforcement of environmental regulations, while iron ore shipments from Brazil were trending downward. For medium-sized and small vessels, market conditions turned weak from the middle of the period as grain shipments from South America and steam coal shipments to China slowed.」

「As described above, market conditions, particularly in the dry bulk and energy resources segments, have entered a recovery trend, but the vessel supply-demand gap has not been fully eliminated, and the business environment is expected to remain uncertain.」

「Market conditions for large vessels remained weak as the impact of the dam collapse in Brazil the previous fiscal year carried into the beginning of the current fiscal year. Subsequently, as Chinese crude steel production became more active and iron ore prices rose, time-charter market conditions generally moved toward recovery following the resumption of iron ore exports from Brazil at the end of June 2019. Market conditions for medium-sized and small vessels also eased at times as grain shipments from South America, which accelerated due to U.S.-China trade friction, drove the Atlantic market and the concentration of vessels in the Atlantic increased the sense of excess capacity. However, conditions remained stable, supported by the sharp recovery in the large-vessel market. Overall vessel supply and demand did not achieve a full recovery: scrapping progressed mainly among large vessels, while medium-sized and small vessels saw successive newbuilding completions.」

「Market conditions fell sharply under the impact of a freight train accident in Australia and a dam collapse in Brazil during the second half of the year. Market conditions for medium-sized and small vessels also softened considerably at times, leaving overall market conditions at the same level as the previous fiscal year.」

「From the fourth quarter onward, the dry bulk business is expected to avoid a significant deterioration in the supply-demand balance, supported by a moderate increase in seaborne transport demand despite a degree of vessel supply pressure.」

「From the third quarter onward, the supply-demand balance in the dry bulk business is expected to improve further, as seaborne transport demand increases moderately and supply pressure from vessel capacity continues to ease.」

「In the dry bulk segment, despite temporary fluctuations in market conditions, overall conditions remained on a recovery trend as the vessel supply-demand gap improved due to recovering cargo volumes and easing supply pressure from newbuildings.」

「In the shipping business environment, cargo volumes on east-west routes remained firm throughout the year in container shipping and freight market conditions were on a recovery trend, but the supply-demand balance did not achieve a full recovery. In dry bulk shipping, large vessels maintained their recovery trend from historically low levels as cargo volumes of iron ore and coking coal bound for China increased. Market conditions for medium-sized and small vessels also continued to recover gradually against a backdrop of firm cargo volumes for grain, coal and other commodities.」

「In the container shipping business, freight market conditions improved from last year’s historically low levels, but a full recovery in the supply-demand balance is still expected to take some time. With higher fuel oil prices and consolidation and acquisitions among shipping companies, a challenging business environment is expected to continue for the time being. In the dry bulk business, seaborne transport demand has continued to increase marginally and market conditions are recovering. Although adjustment of excess vessel capacity worldwide is expected to take time, the vessel supply-demand balance is expected to move toward recovery.」

「In the shipping business environment, cargo volumes on east-west routes remained firm in container shipping, and freight market conditions moved out of the bottom range. In dry bulk shipping, market conditions for large vessels were supported by Chinese demand for steel products, while conditions for medium-sized and small vessels also moved toward recovery against a backdrop of firm cargo volumes for grain, coal and other commodities.」

「In the shipping business environment, cargo volumes on east-west and intra-Asia routes remained strong in container shipping, and freight market conditions recovered. In dry bulk shipping, some market recovery was seen for medium-sized and small vessels, but the vessel supply-demand gap is expected to take some more time to improve.」

「Overall freight market conditions showed a gradual recovery from the historically low levels seen in early 2016. In container shipping, cargo volumes began to improve, particularly on east-west routes, in the second half of the year, but losses widened year on year due to the impact of weak freight market conditions at the beginning of the year. In dry bulk shipping, market conditions also recovered from the historically low levels seen at the beginning of the year, but the vessel supply-demand gap was still improving and market conditions remained capped.」

「Although the full recovery of market conditions surrounding the shipping industry is expected to take time amid persistent uncertainty over the global economic outlook, conditions appear to be gradually moving out of the bottom range, supported by higher resource prices and a gradual recovery in the global economy. In container shipping, short-term freight market conditions, particularly on east-west routes, were improving, but the vessel supply-demand gap remained, and the business was still on the way to recovering profitability and recorded a loss. In dry bulk shipping, market conditions recovered from the historically low levels seen at the beginning of the year and shifted to a recovery trend, but the vessel supply-demand gap was still in the process of improving, and market conditions remained capped.」

「In the container shipping market, demand recovered moderately, but supply pressure remained strong, and major competitors also experienced management problems, resulting in continued severe market conditions. In dry bulk shipping, seaborne cargo volumes began to recover gradually, but the vessel supply-demand balance did not improve and market conditions remained at low levels.」

「In the container shipping market, cargo volumes grew moderately, but continued supply pressure from the completion of large newbuildings meant that the vessel supply-demand gap did not narrow, and freight market conditions remained weak, particularly on North American routes. In dry bulk shipping, although some cargo volumes recovered, the vessel supply-demand balance did not improve and market conditions remained at low levels.」

「In container shipping, cargo volumes remained at low growth levels, and the gap between vessel supply and demand widened as successive large newbuildings entered service. Freight market conditions remained weak. In dry bulk shipping, excess vessel capacity coincided with declining demand, partly reflecting the slowdown in China’s economy, and market conditions remained at historically low levels.」