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From 1962 to 1967

preface

In this issue, we review the history of "K" Line from 1962 through 1967, a period that saw the emergence of major changes in Japan's shipping industry following the end of the so-called Suez boom. At the time, there was a need for the Japanese shipping industry to support exports/imports in order to ensure the sustained development of the nation's economy and trade.

Toward this end, government studies were conducted into the drafting of measures required to strengthen the shipping sector significantly, ultimately leading to the promotion of a merger and consolidation trend throughout the industry.

MISSISSIPPI MARU 

"MISSISSIPPI MARU"

The merger ceremony

The merger ceremony

History chart

1962 May Direct service between the Far East and New York is extended to ports on the Great Lakes.
1963 December The "MISSISSIPPI MARU," the world's first highly automated ship, is completed.
"K" Line signs merger agreement with Iino Kisen and submits a reorganization plan to the Transport Minister.
1964 April Due to consolidation of Japan's shipping industry, "K" Line merges with Iino Kisen, becoming the core company of the Kawasaki Kisen Group. Capitalization increased to 9 billion.
Service between Australia and the Caribbean/West Coast of South America is inaugurated by the "MALACCA MARU".
August "K" Line Agency, Ltd. is established.
September Service between the Far East and the Caribbean/Gulf of Mexico is inaugurated.
December Kawasaki (Bangkok) Co., Ltd., a Thai corporation, is established in Bangkok.
1965 August The ships serving the west coast of Latin America are divided into Central American and South American ships.
November Service between Japan, New Guinea/Papua and northwest Australia is inaugurated.
1966 May "K" Line's domestic shipping division is spun off to form Kawasaki Kinkai Kisen K.K.
6% dividend is approved at Annual Shareholders' Meeting.
December Capitalization increased to 13.5 billion.
1967 April "K" Line's U.S. affiliate, Kawasaki Steamship Co., Inc., is renamed "K" Line New York, Inc.
"K" Line's dedicated telegraph line between Japan and the U.S. goes into operation.
May "K" Line President Hattori is appointed president of the Japan Shipowners' Association.
August The "ITALY MARU" sets a new record for shortest Pacific passage (8 days, 18 hours, 35 minutes.)

Consolidation of the Japanese Shipping Industry

The Japanese and World Economies (1960-1964)

According to the income-doubling program implemented by Prime Minister Ikeda's administration in late 1960, Japan needed an additional 9.7 million gross tons of new ships by 1970 in order to expand its economy and trade volume. Yet given the fundamentally weak state of Japan's shipping industry at the time, such a massive shipbuilding effort seemed practically impossible.
As the world economy grew, so did trade. Between 1962 and 1969, the world's mining and manufacturing industries' production increased by nearly 60%. Trade grew by an even greater margin, however, increasing by roughly 80% in quantitative terms and, due to increased prices of imported goods, by approximately 90% in monetary terms.

World Freight Volume and Ship Tonnage

Please see the table shown below.

Japanese Import/Export Cargo and Ship Tonnage

(in tens of millions of tons)

year Oil Oil Tanker Tonnage Exported Dry Cargo Imported Dry Cargo Non-Tanker
Quantity Growth Rate (%) Tonnage Growth Rate (%) Quantity Growth Rate (%) Quantity Growth Rate (%) Tonnage Growth Rate (%)
1963 63,355 2,537 15,955 81,228 5,962
1964 75,699 19.5 2,950 14.7 17,640 10.5 98,128 20.8 6,175 3.6
1965 89,120 17.7 3,642 23.5 23,376 32.5 110,263 12.4 6,660 7.9
1966 101,645 14.1 4,818 32.3 24,847 6.3 128,181 16.3 7,671 15.2
1967 122,514 20.5 5,694 18.2 24,935 0.4 162,408 26.7 9,316 21.4
Average 18.0 22.2 12.4 19.0 12.0
Aim of the Shipping Industry's Consolidation

Once the so-called Suez boom subsided, the market rapidly cooled starting in 1958. When the new ships ordered during the booming years were completed, market conditions deteriorated further. Some shipping lines fell into arrears on their debt payments. The government responded by revising its sweeping shipbuilding promotion policy and passing two new laws as radical measures to strengthen the industry. The first law was the Provision Measures Law Concerning Reorganization of Shipping Lines, which promoted consolidation of the industry. The second was a partial amendment to the Interest Subsidy Law. The government then proceeded to consolidate Japanese shipping lines into six groups.

This consolidation of the shipping industry aimed to focus and strengthen the shipping business in support of trade, enhance the industry's international competitiveness and aggressively expand tonnage. The objective of improving the shipping lines' operations was to eliminate their shortfall in depreciation expense within five years.

The State of "K" Line

The following is a brief account of how the events that culminated in the merger with Iino Kaiun unfolded. As the major trend toward tie-up and consolidation of shipping lines progressed, in October 1962 "K" Line entered into an operational tie-up with Iino Kaiun, primarily in liner operations. Around the following spring, consolidation premised on merger was fast becoming inevitable, so "K" Line and Iino Kaiun began discussing a merger. It soon became clear, however, that due to the nature of Iino Kaiun's assets, a merger would entail a substantial reduction in capital. The two companies were unable to agree to the conditions of the merger and temporarily broke off their talks.

In September, "K" Line was approached through Daiichi Bank and Mitsui Bank with the suggestion of merging with Mitsui Senpaku. "K" Line agreed to discuss the idea, but it later became apparent that there were irreconcilable differences in philosophy between the two companies. Finding itself back to square one at the end of October, "K" Line resumed discussions with Iino Kaiun. Despite proceeding tortuously, the negotiations ultimately bore fruit. It was agreed that Iino Kaiun would transfer its core operations (mainly its liner routes) to a newly established company to be called Iino Kisen, which would then be merged into Kawasaki Kisen.

After the merger, "K" Line was newly capitalized at ¥9 billion and controlled a fleet of 104 ships (1,549,841 DWT), 55 (939,130 DWT) of which were also owned by "K" Line. The merger gave "K" Line a solid foundation to advance dynamically into the future both as one of the world's largest shipping lines in terms of fleet size and as a well-balanced, integrated organization.

Overview of 6 Consolidated Shipping Groups

(As of December 20, 1963)

By Group New Company Name
Nippon Yusen , Mitsubishi Kaiun Nippon Yusen K.K.
Yamashita Kisen , Shin Nihon Kisen Yamashita Shin Nihon Kisen
Nihon Yusosen , Nissan Kisen Showa Line
Nitto Shosen , Daido Kaiun Japan Line
Osaka Shosen , Mitsui Senpaku Mitsui O.S.K. Lines, Ltd.
Kawasaki Kisen , Iino Kisen Kawasaki Kisen Kaisha
Post-Merger Growth of Ship Tonnage

As the overall scale of Japan's shipping industry grew, the core companies in particular expanded their operations by virtue of the mergers that took place during the industry's consolidation. In addition to liner service, these companies aggressively expanded into the bulk carrier and oil tanker sectors too, in the aim of realizing a stable supply of raw materials and oil tankers to enable the Japanese economy to grow over the long term. This approach to operational diversification was quite different from those previously used in Europe and America. "K" Line's tonnage increased by 1.5 million DWT (to 2.26 times its 1964 level) over the three years following the merger.

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