— This is the script of CNBC’s news report for China’s CCTV on December 10, 2021, Friday.
Murata Manufacturing Co. bought the battery business from Sony in 2017 and has been running losses from this unit ever since. The company hoped to reverse this trend in the current fiscal year thanks to the strong demand for lithium batteries coming from the development of EVs during the past few years; However, Norio Nakajima, President of Murata, said in a recent interview that that might not happen.
“It might still be possible that our battery business posts a profit this term, but I believe I will probably need to apologize for a loss,” Nakajima said. The problem is not on the demand side. In fact, the company believes that the battery market will continue to grow and is planning to spend more to expand production capacity. But the huge burden from cost makes profitability unlikely. “We are being forced to use air freight to deliver our batteries because ships are unavailable, and that costs an outrageous amount of money,” Nakajima explained, adding that “If we were able to use sea routes, we should be able to make a profit”.
On top of more expensive cargo fees, batteries shipped via air incur extra handling charges because they’re a fire hazard. But due to the shortage of containers, many companies are forced to ship products via air instead of sea, just like Murata.
Data from IATA show that global air cargo demand in October was 9.4% higher than the same period of 2019. In the latest market report from the Baltic Exchange, analysts warn that air transportation capacity may shrink further with preventative measures policies and rising omicron cases, keeping freight rates high.
Similar risks also exist in the maritime sector. Some analysts project that international freight rates may rise further next year if Omicron triggers port closures like what happened in 2021
