Contents. No Winter. OCEAN BREEZE No.180. Special Feature. News Roundup

Transcription

1 1 Special Feature Integration of Containership Business among Three Japanese Shipping Companies... P1 News Roundup Service Revision and New Port Ceremony for RORO Vessels Asia-Vietnam Trunk Line Express Service... P5 Contents No Winter Highway to the Future: Connecting the Detroit of the East with the World s Tomorrow by Ship Car Carrier Business Enhancement to Sailing Services between Thailand and Australia... P6 K LINE SHIPPING (SOUTH AFRICA) PTY LTD, an Affiliated Company of K Line in South Africa Donated Work Space Created from a Container to Non-Governmental Organization... P7 We Held the 3rd K Line University Thailand...P8 We Were Awarded Rank A, the Highest Level, for the Survey of Counter-Measures for Climate Change Conducted by CDP... P9

2 Special Feature 1 Integration of Containership Business among Three Japanese Shipping Companies Containerships Business Management Group, Containerships Strategic Group, Corporate Planning Group On October 31, 2016, Kawasaki Kisen Kaisha, Ltd. announced, along with Nippon Yusen Kabushiki Kaisha (NYK LINE) and Mitsui O.S.K. Lines, Ltd., the integration of the containership businesses and overseas container terminal businesses of the three Japanese shipping companies. The aim of this business integration is to join together the major businesses that each of the three companies have carried out on its own and to manage the business through a joint-venture established with the funding of the three companies. This recent integration project went significantly beyond the framework of the joint trade management by alliance, and seeks to facilitate three shipping companies integrating containership business management into one form through the use of best practice. The containership and overseas terminal business run by the three companies will compete against major overseas containership business companies as the sole Japanese containership business enterprise with the spirit of equal footing. Businesses other than the integrated segments will continue to be run independently by each of the three companies. We would like to share the background, concepts and vision of the recent integration project decision.

3 Special Feature 2 Background and Concepts We operate portfolio management as a diversified shipping company that manages a broad range of business segments, including Containerships, Dry Bulk carriers, Car Carriers, Energy Transportation ships, Heavy Lifters for marine resources development support carriers, Logistics, Short Sea and Japan Coastal business. There are numerous shipping companies worldwide, but most of them manage only a single segment or several segments. In this sense, three Japanese Shipping companies, including us, can be said to be companies that have unique management structures. Global maritime trade volumes change depending on numerous factors, including politics, the economy, resource prices and foreign exchange rates, which causes risks to market fluctuations in each business segment in relation to ship supplies. By running portfolio management, we have diversified these business risks and have also aimed to make a social contribution by providing a range of high-quality shipping services to meet customer needs. Along with the global population increase and the expansion of economic activities in many countries, world trade volumes have continued to increase constantly. In this situation, the volumes of daily commodities carried through regular containership transportation routes almost doubled during the decade of the 2000s. Global containership companies developed a fleet of ships to meet these increasing demands and placed orders of ultra-large containerships to increase per-unit cost competitiveness. In the meantime, it is conceivable that containership cargo volume has entered a low-growth phase amid the decline of global economic growth following the Global Financial Crisis and the transformation of supply chains. As a result, many newly built ships for which orders were placed on the premise that demand would increase constantly led to excessive supply pressures, and the market is currently being exposed to huge volatility.

4 Special Feature 3 Under these circumstances, based on the portfolio management of comprehensive maritime transportation businesses, we provided alliance-based efficient transportation services on major East-West routes (Asia- North America, Asia-Europe and the Atlantic, etc.), making a clear distinction from the policy of expanding business scales on the part of leading overseas containership transportation companies for our containership business management policy, and ran business based on high transportation service quality in pursuit of cost competitiveness. Recently, however, we have seen a market trend of seeking profits through huge business scale expansion, such as Chinese shipping companies moves to undertake management integration in addition to European shipping companies active moves to undertake mergers and acquisitions. We are witnessing rapid structural changes in our business environment. To compete against major overseas containership business companies in this market situation, we shared the recognition that it was more important than anything else to secure economies of scale, and undertook consolidation with two other major shipping companies with similar management policies. The integration between three major Japanese shipping companies will result in the formation of a fleet of ships called the mega-carrier 1.5 million TEU Club, that is, a corporate group that ranks in the fourth to sixth tiers with a share of more than 7%. By using the scale of the fleet of ships as a major strength, we will compete against leading global containership business corporations through the long-established expertise of sales and marketing competitiveness for capturing customer needs in addition to strong cost competitiveness that the three Japanese shipping companies have developed to date, such as a high-quality transportation service, efficient transportation service, collaboration with business partners and efficient container management. New Structure The source of the competitiveness (profitability) of the new company that will compete against overseas containership business corporations that pursue economies of scale is the synergetic effects created by combining efficient business management (best practice) with business scale (economies of scale). That is, by making the best of the integration effects achieved by multiplying the creation of new synergies created by integrating original methods that the three Japanese shipping companies developed on their own and the improvement of business efficiency through the advantage of scale created by combining the business scale of the three companies, we aim to achieve stable profits in terms of cost structure in order not to be affected by market conditions, either good or bad.

5 Special Feature 4 As to specific schedules, the new joint venture will be established on July 1 this year and will launch operation on April 1, After moving to the new company, the containership business will be carried out by our equity-method company, but this company will continue to be closely associated with us in terms of the human resources and financial support as one of the K Line Group s core businesses. In addition, by promoting human resources exchanges between the joint venture and the main company, we will build up knowledge and expertise in the containership business and develop synergies with the other business divisions of our company. Our key management policy is to make a contribution to enrich people s lives as a diversified shipping company group. Particularly in Japan, which is surrounded by the sea on all sides and depends on maritime transportation for 99.7% of its trade, it is our key management concept to strengthen and keep providing the containership businesses as fundamental infrastructures that support a wide range of logistics, including imports of foods and daily commodities and exports of industrial goods that support the manufacturing industry. The understanding and cooperation of everyone associated with our corporate group are essential in making this major challenge a success.

6 5 Service Revision and New Port Ceremony for RORO Vessels Asia-Vietnam Trunk Line Express Service K Line (Vietnam) Limited We shifted to a new port terminal in Northern Vietnam in accordance with the revision of our RORO vessels service within the Asian region. The first ship pulled into the new port on October 8, and a special ceremony was held at the terminal. Executive Officer Yokoyama from Tokyo Head Office and General Manager Taki who is responsible for the car carrier business from K Line (Thailand) Ltd. participated in the ceremony, and it was a great success. In his speech, Mr. Yokoyama mentioned our long history with Vietnam, stressing that we had worked hard on the transportation of completed cars to the country for a long time, and that the new service would open new doors to the future of the Vietnamese car industry. After the ceremony in the terminal and speeches by each company s representatives, the attendants viewed the on-site operations. All participants welcomed the cars that were unloaded with applause, and wished for their safe loading and future development. Along with the change of the terminal, we were able to celebrate the ceremony with the cooperation of a large number of people providing training to the stevedores and explanations to customers. [Outline of Service and Terminal] We launched a new service connecting many parts of Asia directly with Vietnam (Ho Chi Minh and Hai Phong). In terms of the service for Northern Vietnam, we doubled the service from once-a-month to twice-a-month and connected our production countries, other than Thailand, directly with Northern Vietnam. Tan Vu Terminal, to which we shifted during this time, is located at Hai Phong port and is closer to urban areas than Cai Lan port, the previous terminal, thereby offering greater convenience. [Asia-Vietnam Route Trunk Line Express Service ] We also secured a space wide enough to handle Port Rotation: Jakarta (Sunday) - Singapore (Tuesday) - Port Kelang (Thursday) - future volume increase as yard space within the Laem Chabang (Sunday) - Ho Chi Minh (Tuesday) - Hai Phong terminal. In terms of berthing, we have priority (Saturday) rights to reach the shore. We have been able to * We connect with this service at Singapore or Laem Chabang from other ports, including Japan, and transport loads to Vietnam. meet three essential conditions close, spacious Frequency of Service: two services a month (fixed-day service) and steady. Vessel Deployment: 4,000 RT Type JASA BAKTI and another type of ship

7 6 Highway to the Future: Connecting the Detroit of the East with the World s Tomorrow by Ship Car Carrier Business Enhancement to Sailing Services between Thailand and Australia K Line (Thailand) Ltd. With a total of only 18 staff members, the Car Carrier Business Division of K Line (Thailand) Ltd. (hereinafter KTL ), which functions as the Asian integration center of the division, plays a significant role in supporting sales and marketing and service arrangements for sailing routes to transport complete built-up cars from Thailand to major countries all around the world. The Car Carrier Business Division is also responsible for managing two sailing routes the Asian Route and the Thailand-Australia Route which are the main car carrier transportation routes. As you already know, Thailand is a host country for many Japanese car manufacturer factories and car-related parts manufacturer factories as a leading global car production center. The latest statistics show that Thailand s domestic car production totals around two million units on an annual basis, and more than half of them, about 1.2 million units, are exported to other countries. Thailand is called the Detroit of the East due to its vibrant car industry prowess. The main export target countries include Asian countries, Australia, the Middle East and Latin American countries, including Mexico. Cars transported via the Asian Route and the Thailand-Australia Route, for which KTL is responsible, make up about half of all complete built-up cars exported from Thailand. We cover both these routes with convenient transportation networks, and have garnered great customer confidence that allows us to enjoy a sizeable market share. Laem Chabang A5 Terminal. Orderly lines of completed cars to be exported. In an effort to enhance our services, we have now opened a new Western Service Route for the Thailand-Australia Route in addition to our conventional Eastern Service Route. This service enhancement has enabled us to achieve more frequent transportation services, expansion of freight space and shorter transportation periods for major Australian ports as part of our efforts to respond flexibly and widely to the increase in demand for transportation of completed cars for the Australian market. Currently, the Australian car sales market is shifting from domestic production to imports from other countries, which suggests the likelihood of an increase in demand for maritime transportation of complete built-up cars for the Australian market in the future. We will continue to move ahead continuously in response to customer needs and provide high-quality services to gain the trust of customers with the aim of further contributing to the development of the car industry in both Thailand and Australia in the future by operating Kawasaki Kisen s highway ships. [Points of Strengthened Thai-Australia Service] Thailand enjoys a rich culture, including famous We have opened a new Western Australian route (two services a month) in addition beach resorts such as Phuket and Phi Phi Island, ethnic to our conventional Eastern Australian route (weekly). This service enhancement has enabled us to achieve the following two things: (1) transport cars to major Australian Thai cooking, Muay Thai (Thai boxing), which fascinates ports in the shortest number of days in response to customer needs; and (2) respond martial arts enthusiasts, as well as beauty treatments and to future increase in demand for transportation services through more frequency and massage. We would be delighted if you would note the greater transportation ability. prowess of the Thai car industry and the outstanding performance of KTL s Car Carrier Business Division as well. *Please check the official website of Kawasaki Kisen Kaisha, Ltd. for more information. The Buddhist statue at Wat Pho, a major Thai cultural landmark

8 7 K LINE SHIPPING (SOUTH AFRICA) PTY LTD, an Affiliated Company of K Line in South Africa Donated Work Space Created from a Container to Non-Governmental Organization Female staff working at the Cape Town office Contributed by Mr. Takayasu Akiba, K Line Shipping (South Africa) Pty Ltd K Line Shipping (South Africa) Pty Ltd (KLSSA) rebuilt a maritime transportation container into work space and donated it to BeadkidZ, a welfare organization in Western Cape, South Africa. BeadkidZ provides unemployed young people with the job of making beadwork and helps them earn an income by selling their products. Beadwork is a traditional South African handicraft with bead decorations. The KLSSA staff equipped the container with doors, windows and air conditioners, also painted the exterior, so that it could be used as work space for creation of beadwork items. In addition, APM TERMINALS SOUTHERN AFRICA, a service provider for KLSSA, provided the used container, and SALT FREIGHT (PTY) LTD provided free container transportation in the local region. Our company group sponsors a mobile library project that supports education for South African children, and has undertaken free container transportation of English books since Inspired by the mobile library project, all KLSSA members are committed to social contribution activities with a strong sense of mission. The beadwork project is also a fantastic example of a project that made outstanding progress due to the ardent sense of mission expressed by the Cape Town office staff members (all of whom are female). We would be pleased if K Line Group members all over the world realized how passionate our staff in South Africa are and inspired to undertake social contribution activities in each area. Beadwork, traditional South African handicraft

9 8 We Held the 3rd K Line University Thailand K Line (Thailand) Ltd. We held K Line University Thailand, the event that has became quite familiar by now, this year as well. We organized classroom discussions, and site tours for 16 participants from Asian countries and the United States over four days from October 4 to 7 as part of our program focusing on the logistics business. The basic structure of the program was almost the same as those of the last two years. We organized lecture-style presentations on the first day and study tours of facilities on the second and third day. At the start of the event, Managing Executive Officer Nakagawa provided an explanation of our policy regarding the logistics business, and the participants listened earnestly to the blue ocean strategy that they should seek. Following this, KTL lecturers made presentations on ships-husbanding, container sales and marketing, the management of car carrier businesses and logistics businesses such as tracking, warehousing both cold and dry. On the second day, the participants visited KBLC* including KCST4* and enjoyed observing fully operational, fully packed warehouse that was completed in October last year and a large-scale CY* and BME* car bases, the size of which was astonishing for many. Following this, BBD* was very interesting. As is the case every year, the participants observed the perfect education system, facilities, IT-operated management systems and loading work by skilled operators and said, Yoshi! (They were imitating the operators, who say Yoshi! to make confirmations during loading work.) On the third day, the participants enjoyed observing air freight operation at an airport, empty container depots (KBCY*), Latkrabang ICD* and the port of Bangkok. The program participants were particularly impressed by the cooling warehouse at BCS2*. Some reefer freight sales operators who participated in the program were particularly impressed by the variety of freight that was filled, as well as the coolness of the warehouse and questions have never been stopped. On the fourth day, the participants made presentations and held group discussions. The elaborate presentations made by the participants were so worth listening to that they were peppered with questions from the other participants and were catalysts for the active exchange of opinions. Following the afternoon presentations, the participants held group discussions and made presentations about how they would be able to utilize what they had seen and learned in the university in the future. The participants chose three themes (1) the possibility of cold storage, (2) a challenge to auto logistics and (3) handling special freight business based on their interests and presentations. Each group discussion was animated, although they swung from right to left and the participants spontaneously decided on presenters and record keepers and drew up scenarios. The participants expect these inputs to be of some help for new future businesses.

10 9 The participants thoroughly enjoyed the graduation ceremony and farewell party at the Polo Club restaurant. All the participants made speeches on the night as well. But because they had been making speeches almost continuously since the eve of the party, they were totally accustomed to making speeches and enjoyed their final night in a friendly atmosphere, knowing how to make people laugh and in what situation to laugh. The reason that fewer people cried than in the previous years might be because the participants had already connected with one another via SNS, had shared photos and had no concerns about being unable to contact one another later. This program enabled us to create another spider thread for the K Line family. We thank the program participants and the people of KTL for their cooperation and participation. We Were Awarded Rank A, the Highest Level, for the Survey of Counter-Measures for Climate Change Conducted by CDP Environment Management Group At the conference of the 2016 Carbon Disclosure Project, which was held on October 25 in Tokyo, we were awarded Rank A, the highest level, by CDP* in recognition of our activities for disclosing climate change information, reducing greenhouse gas (GHG) emissions and alleviating climate change risks, and we were designated as a climate change A-list company. The survey was conducted of about 5,500 leading global companies, and 193 companies were designated as CDP climate change A-listers, including 22 Japanese companies. We were the only shipping business operator on the list. On the stage at the award ceremony, Senior Managing Executive Officer Kadono said: I believe that we were awarded this prize in recognition of our executive officers and general employees working as one for the recent basic policy of fulfilling corporate social responsibilities for sustainable growth. I am extremely happy about it and proud of being awarded this prize.

11 10 We are very grateful to everyone involved, including the in-house task force members and group companies that provided valuable environmental data, for their cooperation. We believe that we were awarded the prize because of our dedicated efforts against climate change issues as corporate management challenges were recognized, including our efforts to reduce ships fuel consumption in order to construct logistical infrastructures for greater energy efficiency under the policy of K Line Environmental Vision 2050 for building ships equipped with the latest energy-saving facilities, especially DRIVE GREEN HIGHWAY, for expanding the scope of GHG emissions data collection and for obtaining third-party certification for greater confidence and transparency. Investors evaluations of CDP are gradually improving and CDP has become a reliable Index in the general society as well as institutional investors and research organization. Major companies are also placing greater emphasis on CDP scores, and many excellent companies in environmental areas compete for CDP scores every year. We were selected as a CDP climate A list company. As employees, we will continue to contribute to achieving a sustainable society with a sense of responsibility and pride, and will remain committed to preserving the natural environment and biological diversity to fulfill the mission of maintaining beautiful blue seas for the next generation. *CDP (formerly known as the Carbon Disclosure Project, but the current formal name is CDP): CDP is a London-based international NPO representing 827 global institutional investors with assets of 100 trillion U.S. dollars. Every year, CDP sends questionnaires to global companies with high market capitalization about the risks and opportunities involved in climate change, water and forests and their related measures, and releases scoring results based on the answers collected from those companies. There are eight evaluation levels ranging from A to D-minus. The evaluation results are disclosed as a universal credit rating index of corporate values, and they are used for materials for making investment decisions.