Thailand beats Chine with Toyota, shipping boom

Bloomberg: Toyota Motor Corp.’s success in selling Thai-made vehicles to the Middle East and Latin America is fuelling a boom for car carriers. Exports of Hilux pickup trucks and Fortuner SUVs helped the Southeast Asian nation overtake China as Toyota’s third-biggest global production hub last year.

That growth helped spur Nippon Yusen K.K., the world’s biggest operator of the roll-on, roll-off ships, to forecast it will carry 3.45 million vehicles this fiscal year, the most in five years.

Toyota has three factories in the country and Honda Motor and Nissan Motor plan to spend a combined US$ 850 million to boost capacity in Thailand. All of them use the country as an export base for other developing countries in contrast to China where they produce predominantly for the domestic market.  That has Nippon Yusen, which counts Toyota as its biggest customer, adding ships and Mitsui O.S.K. Lines also predicting record volume for cars.

“Thailand is a flourishing market for shipping lines,” said Ryota Himeno, an analyst at Barclays Securities Japan Ltd. “Its ports have been upgraded. It’s also close to emerging economies in Asia.” Automakers including Ford Motor and Hyundai Motor also use low-cost vehicle production hubs in countries such as Thailand and India, boosting the need to ship vehicles to import markets such as Australia and New Zealand.

The average rate for chartering a vessel that can carry as many as 7,000 cars was US$ 24,700 a day last year, and it may reach US$ 24,800 this year, according to R.S. Platou Markets AS. The rate is expected to jump to US$ 28,000 in 2015, according to Herman Hildan, an analyst at the investment bank. The global fleet of car-carrying vessels such as the so- called roll-on, roll-off ships, or RoRo, increased to 730 vessels as of this month, compared with 700 at the end of 2011, according to data compiled by Bloomberg.

Nissan, Japan’s second-largest carmaker plans to invest 11 billion Baht (US$ 369 million) to build a second plant in Thailand, it said in November. Honda said this month it will invest about 44.6 billion Yen (US$ 477 million) in a new factory with annual capacity of 120,000 cars.

Nissan and Honda are the two largest sources of revenue for Mitsui O.S.K., according to data compiled by Bloomberg. Nippon Yusen, also known as NYK, plans to increase its fleet of car carriers to 130 by March 2017, from 121 at the end of March 2012. In October, it ordered four new vessels, which are due to be completed by 2015.

“NYK expects the worldwide demand for pure car and truck carrier transport to steadily expand,” the company said in a 15 October statement. NYK’s ships call on Thailand as many as 150 times a year, spokesman Koji Sasaki said in an e-mail. Shares of Nippon Yusen were unchanged at 223 Yen as of 11:12 a.m. in Tokyo trading.

“The stock has gained 10% this year. Mitsui O.S.K. fell 0.3% to 306 Yen and has gained 20% this year. Thailand’s total vehicle output may rise 30% to three million units by the end of 2015, according to Macquarie Group Toyota, which has three factories in the country, exported 406,000 units out of the 880,000 Hilux trucks, Fortuner SUVs, Innova vans and other vehicles it built there last year, according to the company.

“Toyota made about 750,000 vehicles in China last year, and didn’t export any model from the country. The company’s two largest production bases are Japan and the US” Macquarie analysts Chak Reungsinpinya and Clive Wiggins wrote in a report in December.

They also said that: “The biggest growth driver for Thailand’s automotive industry is the expansion of export capacity. Thailand is now one of the fastest-growing global auto markets and production centres.”

One of the reasons for the expansion of production facilities in Thailand is that it has fewer labour issues compared with China or India, said Koji Endo, an auto analyst at advanced research Japan, who referred to the Southeast Asian country as the region’s Detroit. NYK, which had 837 ships as of the end of September in its fleet, aims to carry 18% more vehicles this year.

Mitsui O.S.K. has forecast it will ship a record 3.9 million vehicles this financial year, up 8.3% from last year. The company had 90 car carriers, according to a ranking of ships capable of carrying 2,000 vehicles or more, published by Nippon Yusen. NYK’s four new vessels will be capable of transiting the Panama Canal when a third set of wider locks becomes operational, the company said.

Each of the four vessels will be about 200 m long, about the length of two US football fields, and capable of carrying 7,000 vehicles. “Thailand’s emergence as a car-export nation is a big boost to Japanese shipping lines,” Value Search Asset Management Co. President Minoru Matsuno said, a Tokyo-based investment advisory firm.