Nippon Yusen KK (TSE:9101) has inked a 20-year iron ore transport agreement with Shagang Shipping Co.
Nippon Yusen KK (TSE:9101) has inked a 20-year iron ore transport agreement with Shagang Shipping Co., a unit of major Chinese steelmaker Jiangsu Shagang Group Co. Running through 2032, the new contract is reportedly among the longest signed with Chinese steelmakers. It calls for Nippon Yusen to utilize Cape-size vessels, which can carry around 250,000 tons, to transport ore to China from Western Australia and Brazil.
Jiangsu Shagang produced around 23 million tons of crude steel in 2008. It has previously entered into two agreements with Nippon Yusen: a three-year deal that started in October 2005, and an 11-year contract that began in January 2006.
Container shipping is one of Nippon Yusen's main businesses. But with that segment struggling, the company is adding more long-term iron ore shipping contracts with Chinese steelmakers to secure stable profits not susceptible to swings in the spot market. It is expecting a group net loss of 27 billion yen (US$303.3 million) in the year ending March 2010, its first loss in 23 years. As a result, it plans to halve its fleet of container ships to 60 by the year ending March 2016.