Annual Report 2010(PDF/2905)

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Sectoral Overview Eighty-plus percent of the consolidated revenue of the Shinwa Kaiun Group is from overseas shipping services, while the coastal shipping services, driven by our consolidated subsidiaries Shinwa Naiko Kaiun Kaisha, Ltd. and Shinwa Chemical Tanker Co., Ltd., accounts for a little under 20%. The overseas shipping services comprise Shinwa Kaiun and SHINWA (SINGAPORE) PTE. LTD., which serve as shipping operators, Shinwa Marine Corp., which assumes shipping administration, and overseas owner subsidiaries. As for businesses other than shipping services, the Company operates Shinwa Business Management Kaisha, Ltd., which is engaged in property management services and entrusted with the administrative and accounting business of Group members, Shinwa Systems Co., Ltd., which is engaged in information systems development and maintenance, and Shinwa Engineering Services Co., Ltd., which is engaged in onshore equipment maintenance services. Operational reviews for overseas shipping services, coastal shipping services, and other services for the consolidated fiscal year under review are as follows. Overseas Shipping Services The charter market for Capesize bulk carriers (170,000-DWT class) was affected by sluggish cargo movements at the beginning of the fiscal year, due to production adjustment by steelmakers stemming from the rapid economic recession following the Lehman shock. However, average charter rates for main four routes reached a level surpassing 40,000 U.S. dollars per day because of the recovery of iron ore imports by China in the second half of the fiscal year, as well as the recovery of crude steel production in Japan and Europe, resulting in a gradual increase in cargo movement and the tightening of supply and demand for vessels. In the Panamax bulk carrier (70,000-DWT class) market, charter rates for the Pacific round service remained sluggish, at around 10,000 U.S. dollars per day at the beginning of the fiscal year, because of a decline in transportation demand for Japan. However, rates rose to approximately 30,000 U.S. dollars per day toward the end of the fiscal year because cargo movements of coal and grain bound mainly for China and India were increasingly brisk after summer, and because supply and demand for vessels tightened, due partly to prolonged ship congestion in Australia. In the Handy bulk carrier (30,000-DWT class) market, charter rates for the Pacific round service remained sluggish, at approximately 8,000 U.S. dollars per day in the first half of the fiscal year. However, cargo movements increased as the world economy gradually recovered, and the market continued to show moderate growth. Furthermore, as demand for vessels notably increased after winter, charter rates reached a level surpassing approximately 20,000 U.S. dollars per day at the end of the fiscal year. While the transport of our main outward cargo, steel products from Japan to North America, slowed down, we worked to improve ship-deployment efficiency through booking combination cargo to Central and South America, and achieved success. We maintained stable profits through long-term contracts for nonferrous ore from the west coast of South America, one of our main homeward cargos. In grain transport from the Gulf Coast of the U.S. to the west coast of South America, we worked to improve profits through efficient deployment of our fleet, while benefitting from a market rise. In near-sea trade using small-sized carriers (5,000- to 10,000-DWT class), the transport of steel products bound for China and Southeast Asia remained at a much higher level than expected, while demand for the transport of raw materials bound for Japan was extremely sluggish. In the field of VLCCs (300,000-DWT-class tankers), VLGCs (80,000-cubic-meter liquefied gas 7 Shinwa Kaiun Group Annual Report 2010
carriers) and MR product tankers (medium-range oil product tankers), the balance of supply and demand significantly deteriorated due to the global economic crunch following the Lehman shock. Despite a pickup trend from the fourth quarter, the transport of crude oil, LPG, and oil products as a whole remained at a historically low level. Regarding the chemical tanker business conducted by SHINWA (SINGAPORE) PTE. LTD., the delivery of a new vessel in April 2009 brought the number of vessels in the fleet to four, all of which have operated smoothly. In near-sea dry bulk activities, despite the impact of the market crash in the previous fiscal year, we endeavored to reduce charter rates and improve efficiency in ship deployment by returning ships with high charter rates and shifting to short- and medium-term affreightment contracts. In this business environment, although our overseas shipping service was confronted with negative factors affecting earnings results, including a settlement loss from fuel oil futures contracts signed in the previous year, we took measures under the initiative of the Emergency Countermeasure Committee, launched in the previous year and headed by the former president, aimed at returning high-cost ships early and concluding new affreightment contracts. While we were able to earn stable profits through ship deployment to existing medium- and long-term affreightment contracts on a timely basis, we were also able to earn higher revenues than our initial target as a result of flexible adjustment of our managed ships’ tonnage and improved efficiency in ship deployment. Coastal Shipping Services production cuts by steel makers, but increased in the second half along with the production of coke, due to steel makers’ production recovery. The transport volume of cement remained at a low level because of sluggish domestic demand. In respect to Shinwa Chemical Tanker Co., Ltd., with regard to the demand for LPG, a declining trend continued for both industrial and consumer use due to a downturn in demand. The transport of petrochemicals and black oil (heavy oil, etc.) fell short of expectations, affected by a sluggish transport volume in the first half of the fiscal year. Although LNG demand for industrial use was sluggish due to the economic recession, overall transport volume remained firm, thanks to brisk consumer demand for LNG as clean energy. In this business climate we focused on cost reduction, in conjunction with efficient ship deployment and operation, in the coastal shipping sector. As a result, we were able to earn higher revenues overall than our initial target. Other Services Other services are provided by Shinwa Kaiun Group companies, such as Shinwa Marine Corp., which is engaged in ship management services; Shinwa Business Management Kaisha, Ltd., engaged in property management services and entrusted with the administrative and accounting business of Group members; Shinwa Systems Co., Ltd., which conducts information systems development and maintenance; and Shinwa Engineering Services Co., Ltd., which is engaged in onshore equipment maintenance services. The Group’s business results roughly matched our initial forecast. In respect to Shinwa Naiko Kaiun Kaisha, Ltd., the transport volume of steel products dropped sharply in the first half of the fiscal year due to significant Shinwa Kaiun Group Annual Report 2010 8
Page 1 and 2: ANNUAL REPORT 2010 For the fiscal y
Page 3 and 4: Consolidated Financial Highlights M
Page 5 and 6: About the Merger with Nippon Steel
Page 7: Major Vessels Bulk Carrier: YUGAWAS
Page 11 and 12: Corporate Social Responsibility Pre
Page 13 and 14: initial estimate at the beginning o
Page 15 and 16: Consolidated Statement of Income Mi
Page 17 and 18: History Apr. 1950 Dec. 1957 Feb. 19
Page 19 and 20: Principal Overseas Subsidiaries SHI

Annual Report 2010(PDF/2905)

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