Shippers set sail for better times

After sailing through choppy waters this year, the shipping industry seems to be heading towards recovery next year, buoyed by increasing global trade.

The Baltic Dry Index, a measure of shipping costs for commodities, was at its lowest on Jan 5 this year at 772 points from the record high of 11,793 points on May 20, 2008.

The Shipping Association Malaysia predicted in the middle of this year a 20% contraction of throughput volume by year-end due to the fall in demand and overcapacity.

At the height of the global economic downturn in the first quarter, container shipping freight rates – usually determined by demand for goods from Asia to the West – had dropped 50% to 80% from the previous quarter.

Maritime Institute of Malaysia senior fellow Nazery Khalid said barring any wild swings in the global economy and major shifts in the geo-political order, 2010 would be the year when shipping markets recover.

“Next year, global trade should pick up steam on the back of growing consumer confidence and consumption, as well as a rebound in business, manufacturing and production activities.

“Ports should register higher throughput volume compared with this year and more money should flow into shipping while shipyards should start to see a pick-up in orders,” he told StarBiz.

This would also benefit support service providers and players along the logistics chain such as freight forwarders and hauliers, Nazery said.

“Players in the sectors that have performed well amid the shipping slump, such as those in the tanker and offshore support vessel sectors, should continue sailing smoothly.”

However, Nazery said, amid the bullish forecast, players should not forget the bitter lessons from the economic recession.

“They should be mindful of their own contribution to one of the worst slumps in the history of modern merchant shipping.

“Unrestrained expansion, excessive speculation, reckless business decisions and greed on the part of shipowners and many other players in the maritime sector had contributed significantly to the severe overcapacity in the industry after enjoying a period of tremendous growth prior to the crash,” he said.

Meanwhile, Gagasan Carriers Sdn Bhd expects the shipping industry to see rates increasing in the second half of next year.

Managing director Captain Johari Mohd Noh said the industry went through a period of shock as a result of the US credit and financial crisis.

He noted that the past one year had been very challenging, with low freight rates and rising costs.

Additionally, financial institutions became “super prudent” in this trying time, thus making things worse, he said.

“But on a positive note, we are currently seeing some supply side adjustments due to an increase in (ship) scrapping, some cancellation of new (ship) buildings and an almost stagnant new orders.

“The recovery depends on an increase in confidence in the financial sectors and positive economic growth in major economies which we hope to see in the first half of next year.

“With that, the shipping industry should see rates increasing starting from the second half of 2010,” he said.

On the lessons to be learned from the crisis, Johari said there should be a better understanding between financial institutions and local shipping companies.

“A win-win solution is vital to ensure the survival of local shipping companies and that financial institutions continue to make their lending feasible in the long run.

“Additionally, the Government’s intervention is required to safeguard the survival of local shipping companies for long-term growth of the maritime industry,” he said.

A special fund should also be allocated not to rescue but to help struggling local shipping companies weather the current crisis, he added.

Standard & Poor’s Ratings Services, in a recent report, said the creditworthiness of transportation companies in the Asia-Pacific remained under downward pressure amid a significant slowdown in transport volume and intensifying pricing pressure.

“Standard & Poor’s has made seven rating downgrades and three downward outlook revisions or credit watch listings with negative implications over the last six months among regional transportation companies.

“The recovery prospect in cargo volume looks weak, given the fragile global economy,” it said.

Source: StarBiz

Local logistics companies hope for a sustained cargo volume

Domestic logistics players are looking forward to the sustainability of the industry’s recovery next year after a pick up in cargo volumes since the middle of this year.

The local logistics industry had suffered a double-digit drop in volumes earlier this year, especially in the first quarter, due to the global economic downturn.

Century Logistics Holdings Bhd deputy managing director Mohamed Amin Kassim said the current economic climate had clouded the industry outlook for next year.

“Although there was an increase of freight volumes in the second half of this year compared with the dismal performance in the first half, we should still be cautious until we see the growth continuing beyond the first quarter of 2010,” he told StarBiz.

Amin said the road to recovery might be hampered by upheavals in currencies, devaluation of assets and an overhang of idle transportation assets such as ships and aircraft.

“Going forward, the light at the end of the tunnel seems to be coming from the Asian economies and the economic performance of Brazil and Russia. The logistics industry will rebound with the rise in global trade,” he said.

But despite the bearish economic environment, Century Logistics is expecting its best financial results for the financial year ending Dec 31.

“This expected remarkable achievement will be the result of strategic development after our re-engineering exercise in 2003.

“The building blocks of innovative products and solutions are now bearing fruits,” Amin said.

Freight Management Holdings Bhd (FMH) managing director Chew Chong Keat said while the company was still cautious on the outlook for the next calendar year, it believed it would still chart growth in earnings in the current financial year ending June 30 (FY10).

“This is because we have always adopted a strategy to expand our business in line with industry’s growth. We minimise outsourcing so that we can effectively manage our costs and level of services.

“We are able to withstand the economic slowdown mainly due to this strategy,” he said.

FMH managed to record an 11.5% increase in net profit to RM13.6mil in FY09 amid the economic downturn.

Infinity Logistics and Transport Sdn Bhd managing director Chan Kong Yew said the market expected cargo volumes to return to 2008 figures next year.

“This is supported by the increase of local container volume in October. And if the trend continues, we will see an overall grow on containers (local volume) of between 15% and 18% next year compared with 2009,” he said.

Multi Cargo Express group executive group managing director Hoh Ding Wei expects the market the market to improve after the first quarter of next year.

“Today, China plays an important role in the world’s economic development and is anticipating 9% growth next year, followed by India at 8% and Indonesia 6%. This will help the shipping industry to improve in terms of volume,” he said.

Hoh said Multi Cargo had been preparing for the expected growth next year by hiring more qualified professionals.

“Our mission has always been to scout for new and improved services to cater to the demand of our shippers,” he said.

He added that Multi Cargo’s plans for next year included increasing its existing fleet of trucks for domestic shipments and inland transport, procuring two additional sets of tugs and barges to increase bulk cargo deliveries and expanding into courier and parcel deliveries.

“With these expansion plans, new equipment and services, we are looking at an additional RM3.5mil in earnings and RM20mil in revenue to meet our forecast of RM90mil revenue and RM 7.5mil profit next year,” Hoh said.

Source: StarBiz

Not smooth sailing yet for container shipping

The global container shipping market will remain tough next year and is unlikely to see a return to healthier sustained revenue and volume growth until at least 2011, shipping analysts say.

Many analysts are predicting minimum growth next year at best.

"This year will be the worst-ever year for the market with no growth. Shipping lines have cut capacity, laid up vessels and scrapped older ones earlier, (and) combined services, but are still losing money," Shipping Association of Malaysia chairman Ooi Lean Hin told Business Times.

"In 2010, the market should brace for another tough year, even though there are some signs of recovery in volume, including in the local market," he said.

Ooi cited the increase in throughput of laden containers at Port Klang, the country's largest port, to some 200,000 TEUs (20-foot equivalent units) a month since August this year, compared with some 140,000 TEUs a month at its lowest level amid the global economic crisis. Pre-crisis volume was between 220,000 TEUs and the peak of 230,000 TEUs in July last year.

"Having said that, volume traditionally slows during the period from January to March due to the festive holidays. Normally, volume moves up in the second and third quarters," he added.

However, according to Drewry Shipping Consultants Ltd's most recent projections, the market will have to wait until 2012 before global container port volume exceeds 2008 levels again. It expects Far East and Southeast Asian container traffic to recover faster than that in other regions.

Ooi projects that the global container shipping industry will lose about US$20 billion (RM68 billion) this year, adding that the figure could have been smaller had industry players responded quicker in addressing overcapacity.

"Contrary to the perception of the Federation of Malaysian Manufacturers and the Malaysian National Shippers' Council, we shipping lines do not operate like a cartel.

"If we had (worked as a cartel to set rates), we would not be losing so much money today," he said.

Ooi said freight rates had recovered from their crisis lows, but were still below the pre-crisis levels.

"Rates hit bottom in the last quarter of 2008, but we can see that rates are recovering. For example, rates for containers shipped from Malaysia to Europe today hover at about US$1,500 to US$1,600 (RM5,070 to RM5,408) per TEU, compared with US$250 (RM845) when they fell to their lowest."

Ooi expects the rates to be restored to profitable levels once the imbalance between vessel supply and demand is arrested.

"But until that is achieved, we are not going to see a lot of improvement in shipping companies' bottom line," he said.

According to a report by research firm Alphaliner, third quarter financial reults just published by the main shipping lines suggest that carriers need to remove additional capacity from the market before any sustained recovery in freight rates can be achieved.

"Freight rate increases achieved in the market since July helped little to improve the carriers' bottom line," it said.

Alphaliner said that this year will likely see more than 350,000 TEUs capacity scrapped in total, about 3.5 times more than the 2008 record of 103,000 TEUs.

"Despite these moves, carriers will need to do more to overcome the supply-demand imbalance. Delivery referrals have only served to delay the eventual injection of surplus capacity at a time when the industry does not require the ships.

Further order cancellations will be needed," it added.

Source: Business Times

East M’sian ports more open now

The International Trade and Industry Ministry has partially liberalised the policy governing the entry of international ships into ports in east Malaysia.

It has allowed ocean liners from Japan to deliver goods directly from Japanese ports to Sarawak and Sabah.

Deputy Minister Datuk Jacob Dungau Sagan said the decision was made by the Cabinet two months earlier.

“Before this, foreign container ships were not allowed to call at ports in Sarawak and Sabah directly. They had to go to ports in Peninsular Malaysia, like Port Klang, to unload their cargoes onto Malaysian ships that will then forward these foreign goods to Sarawak and Sabah.

“Now, this partial liberalisation will see big ships from Japan commuting directly to east Malaysia without stopping at any transit port,” he told a press conference yesterday.

“The Government felt that it is important to slowly liberalise this shipping policy so that companies in Sarawak and Sabah need not incur additional costs in importing and exporting goods.”

Sagan said his ministry had proposed the move three months ago because it had found that many local shippers who forwarded foreign goods from west Malaysian ports to Sarawak and Sabah had charged exorbitant fees. These fees eventually translated into higher costs for consumers in east Malaysia because the overhead costs were included in the market price.

Source: StarBiz

MMEA Propose To Buy Two Large Vessels To Enhance Security In Malaysian Waters

The Malaysian Maritime Enforcement Agency (MMEA) hope to purchase two large vessels that can be used for deep sea patrolling covering about 200 nautical miles from the shore.

MMEA director general Admiral Datuk Mohd Amdan Kurish said the vessels measuring 85m long will have the capability to carry helicopters that can be used for patrolling purposes along the Malaysian waters and to monitor activities at oil rigs.

As part of the Langkawi International Maritime and Aerospace Exhibition (LIMA 2009), the MMEA are carrying out a number of demonstrations in the waters off Awana Porto Malai here.

Mohd Amdan said the MMEA's current fleet comprise of 120 vessels of various sizes, class and make, plus six helicopters and two Amfibia Bombardier CL415 aircrafts.

Source: Bernama

Westports staff show their mettle as mega containership makes maiden call

One of the world's largest containership, the 13,300-TEU CMA CGM Christophe Colomb, made its maiden call at Westports on November 22.

The vessel represents the biggest to arrive at Port Klang to date.

Although it was an ad hoc call, Westports Malaysia Sdn Bhd said its operations staff were fully prepared to meet the challenge, recording a gross crane productivity of 37 moves per hour.

"The arrival of Christophe Colomb proves the CMA CGM group's confidence in the ability of Westports to handle mega-sized vessels. Our skillful workforce and state-of-the-art port facilities can handle the growing sizes of container vessels which are likely to make more calls at our port next year onwards," Westports executive director Ruben Emir Gnanalingam said in a statement yesterday.

"Christophe Colomb also proves CMA CGM's ability to move forward in the current economic context.

"This new giant is a strategic asset for the group (CMA CGM), while volume and freight rates on the Asia to Europe market are recovering. This modern vessel enables CMA CGM to meet its growing customer demand on this key market while ensuring economics of scale," Ruben added.

The 365.5-metre long, 51.2-metre wide eco-friendly vessel is fully equipped with the latest technology, designed to optimise hydrodynamics and maximise propulsion. Use of an electronically controlled engine meanwhile helps reduce oil consumption by 25 per cent, resulting in a 2 to 4 per cent cut in greenhouse gas emissions.

In addition, Christophe Colomb is equipped with a fast oil recovery system, which enables bunkers to be rapidly recovered at any time, hence significantly limiting the environmental consequences should there be an incident at sea.

The Christophe Colomb is part of the FAL 7, a European service operated jointly by CMA CGM and Maersk.

Source: Business Times

Maersk Leaks Cash But Still Floats

In spite of shipping-world chaos, AP Moller-Maersk stands out as a solid player.

AP Moller-Maersk ( AMKAF - news -people ) reported a wider than expected, nine-month loss of 3.9 billion kronor ($783 million) on Thursday and disappointed the marketby not upping its guidance. The company's chief executive, Nils Smedegaard, complained of the drop in cargo rates, which are set at semiannual negotiations with clients and through the spot market, as Maersk's biggest problem at the moment.

The average rate for large container ships in the industry has dropped from $38,500 a day in 2005, to just $5,750 in July of this year. (See "The Shipping News Is Ugly.")

Jyske Bank analyst Christian Nagstrup believes that while shipping rates have seen the worst, they probably won't return to their precrisis levels before 2014. Maersk's own daily rates have fallen by 30% year-on-year in the last nine months.

Falling rates come amid sliding volumes, and the resulting oversupply in the shipping industry that went from boom to bust because of the global credit crisis. Today some 10% of the industry's global fleet have been laid up inactive, anchored off the coast of large ports like Singapore.

Only around 3% of Maersk ships have been taken out of service, helped by the company's scrapping of many of its vessels. Maersk also benefits from a relatively strong balance sheet and its makeup as a conglomerate with a large oil and gas business that brings in comparatively stable earnings.

Last September Maersk was even able to announce it was tapping investors for close to $1.8 billion through a share placement, to take advantage of possible acquisitions and to boost its financial flexibility. (See "Maersk Sees 'Long Recovery.'")

Aviate Global broker Dan Waterman believes Maersk is undervalued, and he sees the stock as a play on improving global trade flows that have already started to show some improvement. He points to strong October volumes at rival Neptune Orient Lines ( NPTOY - news -people ) and cargo through Shanghai Port as examples.

Maersk does expect some improvement in rates in the fourth quarter, but management has little incentive to sound positive just yet--raising the company's outlook won't necessarily help with rate negotiations. Fortunately, shipping companies are now in a better position to push for higher rates since spot rates are no longer below contract rates.

The market is currently edgy about the fortunes of the shipping industry, particularly after the bankruptcy of the medium-size American carrier Eastwind Maritime earlier this year. Eastwind had been unable to pay $300 million in debt to its lenders, and its collapse has sent tremors through the European banking sector, which currently holds more than $350 billion in shipping industry loans, according to the New York Times.

Maersk's move to raise funds through a bond issue in September rather than through bank financing, which is still eye-wateringly expensive for shipping firms, is probably another sign of its resilience.

Source: Forbes

Baltic index rise reflects China’s industrial activity

The Baltic Exchange’s main sea freight index, which hit a fresh 2009 high last week, should no longer be seen as an accurate gauge of the world economy, but rather a measure of reviving Chinese industrial activity.

With about 90% of the world’s traded goods by volume transported by sea, a resurgence in seaborne freight movement would be a major sign of a world economic recovery.

Indeed, lately, the Baltic Dry Index (BDI), which gauges the cost of shipping resources, including iron ore, cement, grain, coal and fertiliser, has been climbing and hit a new 2009 high last week.

But analysts and shipping industry officials said the jump in the index was driven by Chinese demand for iron ore, coal and grains, as well as rising port congestion in Australia and China, and did not necessarily bode for a broader world recovery.

”It is not really Japan, European or other Asian demand that is driving this (rally). It continues to be China,” Martin Sommerseth Jaer, analyst with Arctic Securities, said.

The main index, which was launched in 1985, has remained volatile this year due to swings in demand by China for iron ore – the primary material in the manufacture of steel.

“Last year, the BDI did work quite effectively as a global economic indicator,” Peter Malpas, group research manager with shipbroker Braemar Seascope, said. “This year it definitely has not.”

The Baltic Exchange said it had never set out to provide economic insight and analysis through the main index, “but an independent and accurate view” of the cost of moving dry bulk commodities such as iron ore and coal by sea.

”With so many factors coming into play and driving freight rates, what these figures mean for the wider economy is for economists to decide,” a Baltic Exchange spokesman said.

Strong appetite for iron ore and coal in India and China and other industrial activity helped push the Baltic index to a record high in May 2008 of 11,793 points. But global turmoil, compounded by a reduction in demand for raw materials, manufactured goods and consumer products drove it back down to as low as 663 in December.

The volatility this year on the main index has also been driven by the availability of large capsize ships, typically hauling 150,000 tonne cargoes such as iron ore and coal, rather than signals of appetite for raw materials from the wider economy.

In June and November, when the main index rallied, port congestion in China, as well as at coal ports in Australia, tightened the availability of ships, helping to sustain gains.

“The BDI is a reflection of both supply and demand. At the moment, it is being led up by the capes. Clearly congestion has returned,” Nigel Prentis, head of research, consulting and advisory with HSBC Shipping Services Ltd said.

Source: StarBiz

Malaysian Merchant Marine Bhd remains guarded

Malaysian Merchant Marine Bhd (MMM) is cautiously optimistic on the outlook of the shipping industry next year and is carefully planning its business strategies in line with the industry’s cycle.

Executive deputy chairman Datuk Ramesh Rajaratnam told StarBiz that MMM’s core business of shipping would remain but due to the severe slump in the shipping industry in all segments, the management was continually reviewing its strategies.

“All ship acquisition and disposal endeavours are being critically examined. We currently own three vessels but one vessel is pending completion of sale,” he said.

Previously, MMM entered into an agreement with Oceanic Shipping to operate four new 9,000 deadweight tonne (dwt) double-hulled tankers under a bare boat charter with a conditional option to purchase.

Datuk Ramesh Rajaratnam...'There is some renewed interest in the liquid cargo segment.'

The vessels, supposed to be staggeredly delivered this year, are valued at about RM280mil.

But the deliveries were interrupted due to the earthquake in Sichuan, China last year.

Ramesh sees 2010 to be marginally better but only after June as the impact from stimulus packages worldwide had yet to significantly lift trade volumes.

“However, there is some renewed interest in the liquid cargo segment in this industry, and we are a player in this segment,” he said.

On the continuation of the company’s turnaround plan, Ramesh said the current business environment was very challenging and the management was maximising returns on existing assets.

In its previous financial year ended March 31, MMM was in the black, albeit with a net profit of only RM153,000.

Its 2009 financial year was over a 19-month period which started from Sept 1, 2007 as the company had changed its financial year-end from Aug 31 to March 31.

But in its fiscal 2010 first quarter ended June 30, MMM was back in the red with a net loss of almost RM6mil.

Commenting on MMM’s interest in a 20% stake in the Tindalo Oilfield Development Project in the Philippines, Ramesh said it should be noted that this was only an expression of interest, with no agreement on definitive terms by any party.

“The field is wide open for other bidders. The financing of this venture, if we proceed, is still subject to negotiations. At present, MMM has expressed interest to participate and that’s the extent of our interest,” he said.

Source: StarBiz

Tanjung Agas: Land clearing work begins

CONSTRUCTION work at the Tanjong Agas Oil and Gas and Maritime Industrial Park in Pekan began on Oct 1, the state legislative assembly was told yesterday.

Menteri Besar Datuk Seri Adnan Yaakob (BN-Pelangai) said it would take about 16 months to complete the basic infrastructure and other technical work at the park.

Dubbed the "maritime bay of the east", the park will serve as a one-stop centre to meet the needs of oil and gas dredging activities.

Replying to a query from Leong Ngah Ngah (DAP-Triang) on the progress of the project, Adnan said about 8km of land had been cleared to pave the way for road construction.

He said the project concessionaire, Tanjung Agas Supply Base & Marine Services Sdn Bhd, had signed a lease with Daewoo Shipbuilding & Marine Engineering, allowing the world's largest shipbuilder to have a presence at the park.

Adnan said many firms had signed lease agreements and memoranda of understanding to carry out their projects at the industrial park.

"Once the infrastructure, including the main roads, bridge and drainage are completed, investors would have greater confidence in having their projects at the park."

Replying to a supplementary question from Leong, Adnan said the Pahang State Development Corporation had been appointed to oversee the project until its completion in 2014.

Source: NST

Mysterious ship city causes concern

Hundreds of ships mysteriously left idle off the Malaysian coast during the economic downturn are posing environmental and safety hazards, port authorities and fishermen say.

The ships are lying off the southeastern tip of southern Johor state which faces onto Singapore, positioned outside port limits to avoid charges and official scrutiny.

Some authorities said they believed the ships were waiting out the export slump that has deprived them of cargo, while others said they were being used to conduct illegal oil transfers.

"These vessels are not supposed to anchor there. This activity is considered illegal," Johor Port Authority assistant general manager Damon Nori Masood told AFP.

"All of these ships are off port limits, and some are just one metre away from the boundary line, making us unable to take action," he said, adding that the vessels are all believed to be foreign owned or flagged.

Floating city

Damon Nori said the ships are anchored in a narrow strait known as the "traffic separation scheme" (TSS) -- designed as a free passage area to allow authorities to control the movement of vessels in and out of the port.

The huge flotilla is illuminated at night, presenting the illusion of a floating city off the coast. Malaysian newspaper reports have said there are several hundred vessels now gathered there.

Fishermen from coastal villages have complained about seeping pollution which is threatening their livelihood, and Damon Nori said the idle ships pose a safety hazard for vessels attempting to enter the port.

"These ships are blocking the way of the vessels coming to our anchorage, because they need a bigger space when they turn into the anchorage but the TSS is just full of vessels, big or small," he said.

"This anchoring is very much disturbing the passage. The enforcement agency should clear up the area, as there are also concerns over oil spills causing environment issues," he added.

Azlan Mohamad, a fisherman in the area for the past two decades, said that some 300 to 400 ships were parked in the area, causing harm to the industry with oil spills and illegal cleaning of their tanks.

"The ships sit in our fishing area and make our fishing difficult. The ships also dump sludge at night to avoid detection," he told AFP.

"When we ask the ship not to throw anchor, they ignore us and often tell us to fish elsewhere. They are very arrogant," the 43-year-old told AFP.

"The anchored vessels have affected the income of some 3,000 fishermen. Our daily catch has fallen and the oil spills have made our lives more difficult as they damage our nets."

Port authorities declined to identify which agency they believe is responsible for dispersing the ships, and various maritime authorities contacted by AFP passed the buck or said they were unaware of the problem.

The New Straits Times this week quoted Malaysian Maritime Enforcement Agency (MMEA) officials as saying that eight tankers had been seized in recent days for offences including illegal tank cleaning.

"Some of the dilapidated ships that were left there for quite some time may have been used to cover the illegal oil transfer activities," MMEA's southern region head Che Hassan Jusoh reportedly said.

"Oil transfers or bunkering, where one ship transfers its cargo of oil to another while at sea, can only be done once these vessels have a domestic merchant shipping license for such activities," a Malaysian Maritime Enforcement Agency official told AFP.

The process is licensed because of the marine pollution that can occur if it is not done correctly and the transfers must take place in specially gazetted areas because of the danger of fire.

'This is illegal'

But senior marine police officials say they are mostly hamstrung by ambiguous laws and that there is "no black and white" legislation empowering them to clamp down.

However, an official from the marine department in the transport ministry disagreed.

"The law does not directly say anchoring (is illegal) but it falls under 'any other activities' in the section. Everybody in the maritime agencies knows this is illegal," said Fuad Naemoon.

Under the law, the owner, master or agent of an errant ship can be punished by up to two years in jail and a fine, according to Fuad, who heads the port and seafarer division in the southern region office that oversees Johor.

"The enforcement units should be pro-active," he said, pointing a finger at the marine police and MMEA.

"This has happened for almost two years and the number of ships there is increasing since the economic crisis. The government is suffering losses if these ships continue not to report (their presence) and are not paying dues."

He said the illegal anchoring has also caused submarine cable failures, which have resulted in disruption to telecommunication services for countries including Malaysia, Singapore and Indonesia.

Source: Malaysian Mirror

China offers help on straits security

Chinese President Hu Jintao has reiterated his country’s long-held desire to help with the security of one of the world’s most important waterways — the Straits of Malacca.

China would like to work with Singapore, which is one of the littoral states of the sea lane, to “ensure the safety of the Straits of Malacca”, he told Prime Minister Lee Hsien Loong during their meeting, Chinese delegation spokesman Ma Zhaoxu said at a media briefing.

The protection of the critical waterway was one of several security-related areas which China would like to cooperate with Singapore on, said Ma. The rest include counter-terrorism and maritime search and rescue.

The Malacca Straits has become a major concern in recent years for China as the growing regional power broadens its search for energy resources to feed a buzzing economy.

With more than 60 per cent of China’s crude oil imports passing through the straits on their way from the Middle East, the narrow and congested waterway is becoming increasingly important strategically to Beijing.

The Chinese government fears rival powers may starve it of its energy resources by controlling the strait in the event of a security crisis.

State-run China Youth Daily went as far as to argue in 2004 that “it is no exaggeration to say that whoever controls the Straits of Malacca will also have a stranglehold on the energy route of China”.

Hu himself had said in 2003 that “certain major powers” were bent on controlling the waterway.

Other powers such as the United States, Japan and India have also offered to help in the security of the Malacca Straits, but littoral states Malaysia and Indonesia have rejected the idea of external countries stationing military forces permanently in the waterway.

Besides defence cooperation, Hu listed five other areas in which Singapore and China could work together, including economic tie-ups, cultural exchanges and international cooperation at forums like Apec.

A channel which must be maintained, said Hu, is the high-level exchanges between the countries’ leaders. He called it a “key feature” of Sino-Singapore relations and the foundation for strong bilateral relations. His three-day state visit here ends today.

Ma also said Hu called for the expansion of cultural exchanges such as the tie-up between the upcoming Singapore University of Technology and Design and Zhejiang University and the setting up of the China Cultural Centre here.

But the big news of the day, noted Ma, was the sending of two pandas from China to Singapore, which Hu announced on Wednesday.

Ma said: “This is happy news and also a highlight of this trip... I saw that the panda announcement was front-page news in Singapore newspapers.

“I can see the response from the Singapore people has been tremendous. This is very significant to the strengthening of cooperation between the two countries.”

Source: Malaysian Insider

Case Digest: Thor Eagle Maritime Agencies v Innovest Bhd

The recently reported case of Thor Eagle Maritime Agencies v Innovest Bhd [2009] 6 MLJ 74 decided by the High Court in Kuala Lumpur dealt with the features of contracts of affreightment that is instructive for the shipping, logistics and transportation industry.

The case involved a customer that had entered into a contract of affreightment with the shipping line, via a shipping agency, to carry goods.

The time of shipment stated that the date of arrival of the ship would be "about" 10-15 August 1998.

The ship actually arrived on 16 August 1998.

About one week prior to the date of the ship's arrival, the client had communicated clearly to the shipper that it wished to repudiate or terminate the contract.

The facts of the case suggest that the client's act of repudiation or termination was not effective. The court did not deal with the matter. So, we are not able to see why the repudiation by the client was not effective.

The issues before the High Court were:

1. Whether time was of the essence in that contract of affreightment. If it was found that time was of the essence, the client would not be liable to the shipper; and

2. Whether the shipper had made any effort to mitigate losses from the repudiation. If there were no efforts to mitigate, the client's liability would be reduced.

Whether time was of the essence
The High Court relied on 3 matters in ruling that time was NOT of the essence in that case.

a. The contract of affreightment did NOT specifically state that time was to be of the essence in the contract.

b. The contract merely stated that the date of arrival of the ship was "about" 10-15 August 1998.

c. There were previous occasions in dealings between the client and the shipper where the client had proceeded to load the goods even though the ship had arrived later than the scheduled dates.

The High Court made the following observation:

It is trite that in contracts relating to shipping, time may not be of the essence and it all depends on the terms of the contract, intention of parties, custom, practice etc.

Mitigation by the shipper
As with the laws of contract of most nations, Malaysian contract law required the shipper to make an effort to mitigate or reduce its losses from the cancellation of the contract by selling the cargo space to other clients.

In that case, the shipper did not offer any proof that it had attempted to mitigate its losses.

As such, the shipper's claim of USD256,760-00 was reduced to USD80,000-00.

Source: CT Choo

MMEA detains five tankers off Pengerang

The Malaysian Maritime Enforcement Agency (MMEA) detained five foreign tankers for allegedly entering Malaysian waters without permission and conducting illegal cleaning of the vessels near Pengerang.

Its enforcement chief, First Admiral (Maritime) Che Hassan Jusoh said the tankers and the crew, totaling 24 and comprising 20 Indonesian and two Indian nationals, were detained at about 10.30am Sunday at 3.8 nautical miles southeast of Tanjung Stapa.

Checks carried out on one of the tankers, Jakarta-registered M.T Suwito, found 16 bags of sludge on board, he told reporters here Monday.

He said the other four tankers M.T Atago and Antago Power, both registered in San Lorenzo; Her Chang, which is registered in La Paz and Eastern Hill, which did not posses any documents were believed to have not informed the Malaysian authorities about their arrival.

Che Hassan said the five tankers were detained after two others, M.T Jet and Panama-registered M.T Rahmah 1, were detained on suspicion of conducting illegal siphoning of oil.

Source: TheStar