Japan Freight Transport Report Q2 2008

In December Mitsui OSK said it was launching one of the world's largest ore carriers, the Brazil Maru, which would carry iron ore from Brazil to Japan for Nippon Steel. The very large ore carrier (VLOC) had a total capacity to carry 327,180 tonnes of iron ore, and was due to start commercial operation early in 2008. Mitsui OSK said that by August 2008 it would be operating 5 VLOCs of more than 300,000dwt each. The company said these would add to six other VLOCs in operation around the world by other companies. Given the massive surge in demand for iron ore imports from markets such as China, VLOCs are being brought into service in response to a shortage of bulk carriers. Because of their size, VLOCs can only dock at some ports, such as Tubarao and Bonta de Madila in Brazil or Oita and Kimitsu in Japan.

Demand and capacity growth leads BMI's Japan Freight Transport Report to forecast average annual growth of maritime freight carried at a rate of 2.9% over the 2008-2012 five-year forecast period.

Our Japanese shipping forecast is based on various factors. Among them, the Japanese recovery should continue at a moderate but still significant rate. We forecast average annual GDP growth of 2.1% over the next five years, after 2.0% in the preceding five. Companies like Mitsui OSK and its competitors are well organised and able to adapt: NYK, another Japanese shipping giant for example, is introducing a series of energy-saving programmes and restructuring to offer clients an integrated global logistics service. In addition, Japan's commodity imports, manufactured exports, and growing trade with China underpin expected maritime freight demand.

That said, we are relatively cautious over freight turnover forecasts for other transport modes. High petrol prices, have exerted a dampening effect on road-haulage volumes. Fuel prices and safety concerns are also holding back airfreight, but Japanese airports have reduced their very high landing fees. As a result of these adjustments, we now expect average annual growth in total freight turnover to be 2.4% over the 2008-2012 period. The operating environment is good, but not spectacular. Japan has a composite score of 63.2 out of a potential total of 100.0 in our freight transport rating. Japan scores highly for long-term economic and political risk, transport infrastructure growth and for the regulatory and competitive environment. But its overall score is lowered, due to weaker performances for freight growth and on the transport intensity index, which is a measure of foreign-trade dynamism. This is not unusual for a more developed economy like Japan, where growth rates are much more moderate.

According to our latest estimates, the total value of transport and communications GDP will rise to US$317.5bn in nominal terms by 2012, representing 6.3% of Japan's GDP. The transport and communications sector employed 4.03mn people, or 6.3% of the labour force, last year. We see the first figure falling marginally to 3.90mn by 2012, while as a proportion of the total labour force, employment in the industry will continue at the 6.3% level.