Japanese shipping giants "K" Line and MOL have both had the Issuer Rating of their respective companies upgraded by Rating and Investment Information, Inc. (R&I).
"K" Line has had its Issuer Rating increased from "A-" to "A", while the rating on its Domestic Commercial Paper Programme remains unchanged at a-1 (Affirmed).
R&I said the major reason for the upgrade is that "K" Line, especially in the bulk carrier segment, is poised to maintain a stable profit by signing long-term contracts with various customers. Furthermore, it expects equity capital will be steadily enhanced based on high profit.
In the meanwhile, R&I has also boosted MOL's Credit Rating, or Issuer Rating, from A+ to AA-. In addition, the short-term rating on MOL's Commercial Papers has been increased to "a-1+," effective from May 30 2008.
The main reasons for the upgrade are: the bulk ship freight rate market remains high due to developing nations' active demand for resources, which is projected to grow. At the same time, more remote sources of raw materials require longer transport distances.
The company has seized opportunities arising from the rapid expansion of ocean shipping. As a result, profits increased rapidly, and MOL's consolidated ordinary income has ranked top among the three Japanese major ocean shipping companies since fiscal year 2003, ended March 2004.
MOL is forecasting stable profits for FY2008 and FY2009 thanks to mid- and long-term transport contracts. R&I anticipate that MOL can maintain high-level profits for the foreseeable future, a statement from MOL said.
Looking at the 2010 issue of fleet demand and supply, R&I expects the fleet supply to be lower than the initial forecast as a result of the subprime loan crisis and delays in supplying steel plates for shipbuilding. It is unlikely that the freight rate market will drop significantly, considering the number of overage vessels to be scrapped and strong demand in developing nations.
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