After it said that it expects anextraordinary loss of JPY 100 billion (USD 972 million) on its containership assets, Japan’s shipping major Nippon Yusen Kabushiki Kaisha (NYK Line) is set to recognise the largest ever impairment loss in container shipping history, according to Alphaliner.
The loss represents almost a quarter of the total assets of NYK’s liner shipping business, which stood at JPY 419 billion at the end of March 2016.
The extraordinary loss posted by NYK exceeds previous impairments recorded by other container carriers by a large margin. This includes Mitsui O.S.K. Lines’ (MOL) impairment loss of JPY 56.5 billion recorded in March 2016 for its containership assets and Kawasaki Kisen Kaisha’s (K Line) cumulative impairment losses for its container shipping business of JPY 13.4 billion in the seven years from 2009 to 2016.
Apart from the Japanese shipping lines, most other main carriers have not taken any significant write-downs on the value of their containership assets, even though current market values are well below historical tonnage values.
Based on Alphaliner estimates, the Top 18 carriers may need to write off some USD 35 billion, assuming they were to take a 25% impairment loss on the value of their total assets.
The carrying values of such assets are significantly higher than the amounts that are currently recoverable, based on the depressed market values for ships and container equipment.
“Total impairment losses would vary depending on the individual carrier’s fleet composition and accounting policies, but NYK’s move could trigger a fresh review of containership asset valuations that have fallen to historical lows,” Alphaliner said.