From spot-market tramp shipping to LNG carriers and long-term contracts (2013)

Changing how it wins, after losing

President Muto Koichi, who said in 2010 that long-term contracts do not necessarily produce stable profits, said in 2013 that the company was increasing the medium- and long-term contracts that yield stable profits. That the same man came round in three years to the strategy he had denied is where the character of this shift shows. What made it possible to commit, it appears, was that two consecutive years of losses and ¥125.4 billion of extraordinary charges had written down the book value of the ships and cut off the retreat. The company did not change how it wins while it was winning; it changed after losing.

Choosing stability, however, was also a kind of bet. An LNG carrier is a business of roughly ¥20 billion per ship recovered over about twenty years, and Muto himself said the contribution to profit would come five to ten years out. In reading demand twenty years ahead and the creditworthiness of the counterparty, it differs from reading the spot market only in kind. The Russian Arctic project remained as something President Hashimoto Tsuyoshi would discuss in terms of possible sanctions. The character of taking a position on the market has not disappeared; the term of the bet can be seen to have lengthened to twenty years.