Malaysian ports still expect growth in volume

MALAYSIA’S major ports should be able to withstand the onslaught of the global economic crisis, at least for this year.

In fact, many are still projecting growth in volume although business may not be as robust as in previous years.

There are about seven major container ports in the country – Northport and Westports in Port Klang; Penang Port; Port of Tanjung Pelepas and Johor Port in Johor; Bintulu Port in Sarawak; and Sapangar Bay Container Port in Sabah.

The harsh impact of the global economic crisis has resulted in declining world trade. However, healthy intra-Asian trade and higher local public spending growth is expected to spur more imported goods and raw materials.

OSK Research, which has lowered the country’s gross domestic product forecast for this year to 1.1% from 2.7%, says the RM7bil economic stimulus plan by the Government should be able to support high public spending this year.

Most analysts say the ports’ stellar performance in past years has boosted their resilience to sail through the choppy waters.

Moreover, they are somewhat “protected” from the economic storm due to their location, particularly those along the Straits of Malacca, the main maritime trade route in Asia.

Ports in east Malaysia are also strategically placed in the Brunei, Indonesia, Malaysia, Philippines-East Asean Growth Area (BIMP-EAGA).

It helps, too, that the ports have a mixed portfolio of handling transhipment as well as exports and imports. Most of the Malaysian ports managed to meet volume targets last year although by the fourth quarter, early signs of a trade decline were evident.

Northport (M) Bhd and Westports Malaysia Sdn Bhd, the two terminal operators at the country’s maritime gateway Port Klang, are confident of maintaining volumes this year.

Northport posted slightly more than three million 20ft equivalent units (TEUs) last year, up 5% from 2007. It also expects to continue its RM585mil expansion plan which will be funded with internal funds.

On the other hand, Westports recorded around 16% volume growth in 2008 to slightly under five million TEUs. The positive forecast this year is supported by Westports’ biggest customer, CMA-CGM. Similarly, the global slowdown has not thrown a spanner in the works for Westports’ RM800mil expansion. The port’s container terminal five has been completed, adding a capacity of 1.2 million TEUs to a total of 7.2 million TEUs.

Its executive director Ruben Emir Gnanalingam, in his New Year’s message to the staff of Westports, says the company will embark on plans to consolidate its business in terms of processes, staff skills and initiatives given the relatively quieter period.

“Our manpower strength is currently at 3,650, which is sufficient to see us through the expected volume.

“Our next batch of recruits would probably come in during the second quarter of next year,” he said.

The country’s main transhipment port, Port of Tanjung Pelepas (PTP), expects to break even this year at 5.6 million TEUs.

“The current situation is unprecedented,” says chief executive officer Capt Ismail Hashim, adding that the best and worst-case scenario would see a 15% rise or 10% drop in cargo volume for the year.

Noteworthy is that PTP has experienced a 6% contraction in cargo volume in the final quarter of 2008 against the corresponding period a year earlier.

“But we are keeping our hopes up as our main-line operators, such as Maersk and Evergreen, are anticipating marginal growth this year,” he says. “The non-decline forecast is largely based on our exposure to the still healthy intra-Asian trade.”

Penang Port, according to its chief operating officer Mohd Niana Merican Abd Kadir Merican, expects a flat growth this year given the uncertainties going forward while Sapangar Bay Container Port (SBCP), managed by Sabah Port Sdn Bhd (a wholly-owned subsidiary of Suria Capital Holdings Bhd), is not expecting volumes to fall.

Sabah Port also manages seven other ports in Sabah. Suria Capital group managing director Datuk Abu Bakar Abas is optimistic of the outlook for this year due to the Government’s stimulus package to boost economic activity in the country.

Source: Star Online

Bombardier targets South-east Asia

SUBANG JAYA: Canadian aircraft maker Bombardier Inc wants to enhance its presence in Southeast Asia after securing a contract for the supply of two amphibious aircraft to the Malaysian Maritime Enforcement Agency (MMEA).

Bombardier's amphibious aircraft division president Michel Bourgeois said it would use the aircraft for MMEA as the benchmark and the showcase towards marketing it to the rest of the region.

Bourgeois . Photo by Suhaimi Yusuf

"We hope that this aircraft will be able to be the showcase in Asia. If Malaysia is able to demonstrate the capability of this aircraft, we believe that other countries will come forward," Bourgeois told The Edge Financial Daily .

From left: Najib, Maritime Malaysia DG Admiral Datuk Mohd Amdan Kurish and Deputy Minister in the Prime Minister's Department Datuk Hasan Malek boarding the Amphibious CL415. Photo by Suhaimi Yusuf

He was speaking after a ceremony to hand over one of the aircraft, the Green Aircraft Amphibious Bombardier CL415, to Deputy Prime Minister Datuk Seri Najib Razak, who received it on behalf of MMEA. The other aircraft will be delivered by November.

Bourgeois said the aircraft, which specialises in fire fighting, search and rescue, surveillance and emergency operations, was unique in the region, with Thailand utilising an older model of the amphibious aircraft.

He was optimistic about Bombardier's potential in the region despite the global economic uncertainty as the aircraft was specifically used by governments and paramilitary organisations.

"We go through a different cycle than you will see in the private sector, so we remain hopeful that we will not be affected," he said. Bombardier has supplied commercial aircraft to countries in Asia including China, Hong Kong and Singapore.

Speaking at the ceremony, Najib said the aircraft purchase underscored the government's commitment to ensuring safety and security in Malaysia's sea zones.

"As a major trading nation, it is important for us in terms of security and economic imperative to ensure our sea lanes are safe," he said.

Bourgeois also said Bombardier, which won the open tender last June, had a two-year contract with MMEA to train its pilots for flight preparation.

The company is also training MMEA engineers and technicians from its local service partner AJ Aeroservices Sdn Bhd to perform maintenance on its aircraft.

Source: Edge Daily

Penang air freight forwarding dives

THE freight forwarding business in Penang experienced the most significant dip last month.

Penang Freight Forwarders Association (PAFFA) president Joachim Loo said December was the worst month in the past seven years for the air freight business.

“For the air-freight business, the inbound segment dropped by 52% in December to 2,838 tonnes from 5,850 a year earlier. The export segment declined by 32% in December to 4,971 tonnes from 7,505 previously,” he told StarBiz.

For the fourth quarter, imports and exports dropped by 35% and 23% respectively, compared with the corresponding quarter in 2007, he added.

Penang Port in operation. Ocean freight companies in the state expects business to shrinks by 15% this year.

PAFFA vice-president (air freight division) P. Kalimuthu said electronics and semi-conductor products comprised between 60% and 70% of the goods exported from Penang via air.

“The rest are products from the garment industry and other manufacturing concerns. This is why when the electronics and semiconductor industry overseas enters recession, we will be badly affected as well,” he said.

The freight forwarding business was also hurt by the extended festive holidays taken by the multinational companies, Kalimuthu said.

“Usually, the leave for the Christmas and New Year period is one week. This time, the holidays were extended to two to three weeks.

“Furthermore, their employees have been given two more days off on top of the four off-days per month,” he said.

Due to poor business, PAFFA members involved in air freight forwarding have implemented cost-cutting measures.

“These include doing away with overtime pay. If necessary, we will compensate the staff with another day off. We will not retrench workers yet although we expect the freight forwarding business to dive further in January and February. We hope business will not plunge to a point where we need to retrench,” Kalimuthu said.

He urged the Federal Government to lower fuel charges.

“Tenaga Nasional Bhd, as a government-linked company, should also reduce power charges. We also appeal to Malaysia Airport Holdings Bhd and MAS to lower rentals for PAFFA members.

“Likewise, we appeal to KL Airport Services Sdn Bhd to cut terminal charges to 10 sen per kg from the present 15 sen,” he said.

Meanwhile, PAFFA vice-president (ocean freight board division) Krishnan Chelliah said the ocean freight was not as badly affected as air freight.

“The volume of imported cargo coming through the Butterworth North Container Port dipped by about 10% to 568,000 20ft equivalent units (TEUs) last year from 628,000 in 2007.

“For exports, the volume of cargo declined by about 3% to 406,000 TEUs in 2008 from 420,000 in 2007.

“The reason is that the bulk of cargo shipped comprised largely wood and rubber-based products such furniture and rubber gloves, which are still not that badly hit by the global slowdown.

“The inbound cargo consisted of mainly raw materials used in the general industries,” he said.

Krishnan said PAFFA’s ocean freight members were expecting to face some 15% drop in their import and export business this year.

“We are also implementing cost-cutting measures such as halting overtime payments and not replacing outgoing employees,” he said.

The ocean freight business in the north employs some 5,000 people.

Source: Star Online

How Somali pirates are affecting East Asian ties

SOMALI pirates off the coast of Africa are transforming geopolitical relationships in East Asia.

First, China took the unprecedented step of despatching its navy to the Gulf of Aden to protect Chinese shipping.

Now, Japan is drafting legislation to provide a legal framework for it to despatch warships abroad on anti-piracy missions, despite its pacifist constitution.

But perhaps the most profound ramifications of these ostensibly anti-piracy movements is the impact they will have on Taiwan and its relationship with China, which claims the island as part of its territory.

The Chinese government has said that its naval vessels will provide convoy help for Taiwanese ships as well as those of the mainland and Hong Kong. 

This has created a sensitive, and dangerous, situation for Taiwan, which insists on its own sovereignty.

Thus, it was awkward for Taiwan when China announced last week that among the first beneficiaries of China's protection was a Taiwanese-owned tanker, the FormosaProduct Cosmos, owned by the Formosa Plastics Marine Corporation, as it sailed through the Gulf of Aden. 

Taiwan, whose formal name is the Republic of China, does not want to be seen as under the sovereign protection of the mainland, known as the People's Republic of China.

The following day, Chao Chien-min, vice-chairman of the cabinet-level Mainland Affairs Council, said the Taiwanese government had not been involved in arranging for the Chinese navy's escort of the ship. 

He said that the tanker was registered in Liberia and was rented out to a South Korean company and so should not be considered a Taiwanese ship.

China last month offered to help protect Taiwanese ships that came under attack from Somali pirates but, Chao said, Taiwan was not prepared to accept China's offer. 

In fact, Taiwan has declined to set up any mechanism for Taiwanese ships to request help from the Chinese navy.

No doubt, Taiwan is fearful that if it were to accept such a service, the international community would come to think of the island as part of China, like Hong Kong, and its nationals as being subject to Chinese jurisdiction as well as its protection.

After all, acceptance of Chinese protection would make Taiwan appear little more than a ward of China in the eyes of the world.

The day after the Chinese navy escorted the Taiwanese tanker, the American Institute in Taiwan (AIT), Washington's de facto embassy, issued a statement saying that the US navy had a responsibility to render help to any vessel in distress anywhere in the world that requests its help.

However, AIT made clear that it did not offer naval escorts for Taiwanese merchant vessels.

Thus, the United States, which is the ultimate guarantor of Taiwan's security, is not able to match the offer being made by China.

Taiwan has made known its willingness to accept protection from other countries, such as the US and the European Union. 

And if Japan does decide to send its navy into the Gulf of Aden, then presumably Taiwan would be willing to accept its help as well.

That being the case, Taiwan has little reason to refuse help from the Chinese navy, if it is seen as part of an international flotilla patrolling the area. 

There are, after all, 45 warships from various countries in the area, and only three of them are Chinese.

The problem is that it is one thing to be protected by an international armada, it is something else to be taken under the wing of the Chinese navy.

The ideal solution would be for Taiwan to send out its own navy to protect Taiwanese shipping. But Taiwan's diplomatic isolation makes this difficult.

None of the countries in the surrounding area recognises Taiwan, and so its naval vessels may have difficulty obtaining permission to use ports along the way for refuelling.

This technical difficulty may be difficult for Taiwan to overcome. 

That is why Taiwanese Foreign Minister Francisco Ou has said that seeking foreign help could be a "more plausible" way for Taiwan to deal with the piracy problem.

This is a formidable challenge for Taiwan. 

Beijing is offering itself as the protector of Chinese ships and if Taiwan itself is unable to provide this protection or solicit such help from other nations, it would be difficult to fault Taiwanese shipowners if they avail themselves of the help that is being offered.

And therein lies a slippery slope.

Source: NST Online, op-ed piece by Frank Ching

MISC halves vessel orders to 4

KUALA LUMPUR: MISC Bhd has halved its orders of chemical tankers to be built by South Korea’s SLS Shipbuilding Co Ltd from eight to four vessels.

MISC said yesterday the revision was mutually agreed between the company and SLS after amicable negotiations. MISC did not reveal the final contract sum for the four vessels.

MISC had announced in July 2007 that it had placed an order of eight double-hulled vessels of 45,000 DWT each for a total value of about US$430 million (RM1.54 billion). The first three units were to have been delivered this year and the remaining five in 2010.

It had said the vessels would expand its chemical fleet capacity and extend the geographical coverage of its operations towards increasing its market share in chemical, vegetable oil shipping and products trade.

The new vessels are to be fully IMO-compliant taking into account the new MARPOL (International Convention for the Prevention of Pollution from Ships) regulations.

Source: Edge Daily

Striking the right balance

THE shipping downturn will narrow the gap between the supply and demand of seafarers, according to the Malaysian Maritime Academy (Alam).

Last year, the Transport Ministry reported that there was a big shortage of local seafarers working on board 3,582 Malaysian-owned merchant vessels.

About half of them were Malaysians.

 It takes about 10 years to develop a fresh school leaver into a master mariner or a chief engineer.

Internationally, before the global financial crisis hit the shipping industry in the fourth quarter last year, it was said that the maritime sector was short of about 20,000 seafarers.

Alam chief executive officer M. Adthisaya Ganesen said the shipping industry slowdown had marginally narrowed the gap between supply and demand of seafarers.

“Not much, but if the market deteriorates further, shipping companies operating in certain sectors may resort to cutting wages,” he toldStarBiz. “And in some cases, they will also be selective in choosing the ‘right’ seafarers.”

However, he said, shipping companies should be careful in managing their human resources since it would not be easy to find efficient seafarers once the market rebounded from the current condition.

“We have to bear in mind that it takes about 10 years to develop a fresh school leaver into a master mariner or a chief engineer,” he said.

Alam will be able to produce marine seagoing engineers quicker and at a lower investment cost without compromising on quality and competency.

As a result of the downturn, Adthisaya expected a cut in sponsorship for cadets this year.

“It is anticipated that industry stakeholders will be very cautious in their spending and implementing cost-cutting measures.

“Sadly, training is always seen as a cost item and it is most likely to get the axe.” From experience, he said, in each recession, investment in human capital ceased. “When the situation changes to an upturn, companies scramble to find people.

“The biggest danger is the tendency for companies to compromise on quality and competency of talent in order to make up for the shortfall in manpower,” he said, adding that companies should have long-term manpower planning.

“Usual business plans, which include fleet expansion, mergers and acquisitions, should take into consideration the aspects of recruitment and training of manpower.

“In doing so, the companies are always better prepared and ready to face the challenges with the right choice of people,” he said.

In the bid to produce competent seafarers, according to Adthisaya, there are cases where the record number of sponsorships and cadet intake of about 500 cadets per year had created a bottleneck in board training.

Apart from completing their cadetship programme, the graduates have to attain the minimum sea time requirements to sit for their certificate of competency (CoC) examinations.

“But, Alam is very careful about the number of cadets that we take in as the numbers are based on the availability of training shipberths.

“Not only do the shipping companies (sponsor) have to ensure provision of shipberths for the cadets but also for those who have graduated to enable them to clock their sea time and become eligible for their higher CoC.

“But, if more ships are being laid off and newbuilding orders are being cancelled, then there could be further reduction in availability of training shipberths,” he said.

Expressing his personal view on the ups and downs of the shipping industry, Adthisaya said shipping was a cyclical industry and it closely followed the growth or decline of trade.

“On the bright side, 90% of goods are still being transported by sea and globalisation cannot be reversed.

“It is almost certain that the industry will pick up fast once the economy recovers,” he said.

Alam, a wholly-onwed subsidiary of MISC Bhd, currently has about 1,476 cadets.

“The next intake in July will see a reduced number in pre-sea student due to the global economic crisis,” Adthisaya said.

Source: Star Online

Drop in crude tanker demand

DEMAND for crude tanker shipping is expected to contract by 13% this year as the Organisation of Petroleum Exporting Countries (Opec) cuts oil production.

According to the latest CIMB Research sector update report, the drop in crude tanker demand would be further compounded by average ship supply that could grow by 7% this year.

It said this would reflect an excess supply of 47.8 million dead weight tonnes (dwt) or 160 very large crude carriers (VLCC).

One of MISC’s very large crude carrier, Bunga Kasturi Empat.

The Baltic Dirty Tanker index (BDTI) could fall as much as 51% year-on-year (y-o-y) to just 750 points or lower.

The BDTI is the average rate on dirty tanker routes. Large tankers generally carry “dirty” (black oil or crude oil) cargo as opposed to clean tankers that ship refined products such as petroleum, diesel fuel, jet fuel or chemicals.

The most recent cut in Opec production quota by 2.2 million barrels per day came into effect on Jan 1 but most likely had not been implemented in full, suggesting that tanker rates would see more pressure ahead, the report said.

“We conclude that Opec production cuts alone are enough to force VLCC and suezmax tankers demand for this year to fall as much as 13% y-o-y, while aframax tanker demand could fall by 9% y-o-y,” it said.

Over the past few months, Opec has responded to the sharp drop in oil prices by targeting large output cuts, which will be reflected more clearly in months ahead.

On Sept 10, Opec announced 500,000 barrels per day (bpd) cut in output, followed by a 1.5 million bpd cut on Nov 1, and the latest 2.2 million bpd cut effective Jan 1.

The report said the impact on the crude tanker shipping markets would be significant because the Opec cuts were borne primarily by Middle East and West African producers, which typically ship their cargoes on long-haul journey to markets in the Far East, North America and Europe.

“The negative tonne-mile impact on shipping demand will therefore be larger than if the output cut had been borne by producers which are proximate to the main consuming nations, such as Latin/South American or North Sea producers,” it said.

For instance, it takes 82 days to ship crude oil from the Arabian Gulf to the US Gulf, 75 days to Rotterdam in Europe, and 45 days to Chiba in Japan.

West African voyages take 60 days to the Far East and 42 days to US Gulf. In contrast, voyages from the North Sea to Rotterdam only take eight days, while Venezuelan oil takes 15 days to arrive at Texas City in the United States.

Compounding the lower oil demand, the tanker fleet was anticipated to grow at almost 12% this year, the report said.

This is due to the increase in newbuilding deliveries only to be offset by a modest amount of scrapping.

“More than 70% of the crude tanker orderbook is with South Korean and Japanese yards, where the prospects of shipyard failure or delivery delays are minimal and only less than 30% of tankers were ordered from Chinese yards.

“We do not expect any conversion removals (tankers to bulk carriers) this year because of the collapse in dry bulk rates, a key reason why our current fleet growth forecast for this year is almost three percentage points higher than the prior expectation.

“We have assumed that 15% of single-hull ships will be scrapped this year, followed by another 75% in 2010 because of International Convention for the Prevention of Pollution from Ships (Marpol) mandatory phase-out rules.

“The scrapping will offset most of the 2010 newbuilding deliveries, resulting in only 1.4% net fleet growth and setting the stage for a rebound in crude tanker rates,” it said.

However, according to the report, MISC Bhd’s tanker business was expected to remain profitable under the tough conditions.

“This is due to its 50% term contract protection and low capital costs. The company’s earnings are also on the defensive mode due to stable liquefied natural gas as well as growing offshore engineering businesses,” said the report.

MISC is the biggest tanker owner and operator in the country with 11 VLCCs and 28 aframax vessels.

Source: Star Online

Survival of the fittest

THE local maritime industry is expected to sail in choppy waters this year as global trade continues to decline.

But the impact of the global economic downturn on the country’s goods transportation sector is expected to be cushioned as intra-Asia trade is still at a healthy level.

This is reflected by the fact that all major ports in the country – Westports, Northport and Port of Tanjung Pelepas – met their volume targets last year.

The three ports are only anticipating slower growth this year as they could still rely on intra-Asia transhipments as well as the import and export business.

Northport's container yard in Port Klang.

For example, although the price of crude palm oil has been falling in recent months, exports to India, one of the major importers of our crude palm oil, is still robust.

Northport, a major import and export terminal in Port Klang, posted slightly above three million 20-foot equivalent units (TEUs) last year, up 5% from 2007.

Due to its large exposure to import and export cargo handling, the port is expected to post slower growth this year compared with last year.

But Northport managing director and chief executive officer Datuk Basheer Hassan Abdul Kader earlier said with the company’s low gearing of almost 0%, Northport could withstand the onslaught of the global economic crisis.

Westports, which has more transhipment business, is in somewhat better shape in terms of volume.

But the declining trade is also affecting Westports’ volume to a certain extent, and the port does not expect its “usual” double-digit growth this year.

The port recorded about 16% volume growth in 2008 to slightly less than five million TEUs.

The country’s main transhipment port, Port of Tanjung Pelepas, posted just below 5.8 million TEUs last year, slightly below expectation, but an increase of about 6.1% over 2007.

Malaysian shipping companies which are mainly involved in the container, bulk and crude palm oil (CPO) transportation are also not spared from the whiplash of the global economic crisis.

MISC Bhd, which operates a relatively small container shipping business compared with its main activity of liquefied natural gas (LNG) transportation, should withstand the lower demand in container cargo.

The country’s major bulk carrier operator, Malaysian Bulk Carriers Bhd (Maybulk), has now ventured into the lucrative offshore support vessel (OSV) market after a collapse in bulk transportation where the Baltic Dry Index plunged more than 90% from its peak of 11,793 points on May 20.

Maybulk has also completed its proposal to acquire a 22.08% stake in PACC Offshore Services Holdings (POSH) for US$221mil.

Based on the current local and international demand, the OSV sector outlook is expected to be positive this year.

For main players in the OSV market such as Alam Maritim Resources Bhd and Tanjung Offshore Bhd, it should be smooth sailing.

The current stronger oil price, which breached US$50 per barrel recently, will also propel OSV demand to greater heights this year.

But future financing for fleet expansion could be difficult as banks are getting jittery on lending, especially for this particular capital-intensive industry.

Thinking ahead, Alam Maritim recently entered into a joint venture with CIMB Private Equity to acquire five vessels for a total of US$70mil.

The local logistics sector is already feeling the pinch of the declining trade. This is due to Port Klang’s monthly volume that has contracted by as much as 25% in the past few months.

On the bright side, the current economic turmoil will result in the survival of the fittest and make the industry less fragmented.

Source: Star Online

M'sian hauliers gearing up for greater efficiency

ASSOCIATION of Malaysian Hauliers (AMH) is working towards greater efficiency to prepare for the reduction in the free storage period from five days to three for containers at Port Klang effective July 1.

Free storage period is the window duration given to importers or exporters to clear or send their goods to and from the ports without any charges.

"It is an international standard that we ought to follow. It will be good for Malaysia as a maritime nation." - Datuk Ahmad Shalimin Shaffie

After that period, a storage fee will be imposed on a daily basis per container.

The reduction in the free storage period was delayed from Jan 1 to July 1 in view of the current economic climate and the appeal by some quarters in the maritime community in Port Klang.

Since the plan was mooted in 2002, several deadlines have been postponed as the shipping community in Port Klang was not ready for the shorter free storage period.

AMH president Datuk Ahmad Shalimin Shaffie hoped that this would be the final deadline where all parties in the supply chain, including importers and exporters, must improve their efficiency for the shorter free storage period by July 1.

“It is an international standard that we ought to follow. It will be good for Malaysia as a maritime nation,” he told StarBiz.

He said the three-day free storage period would improve the turnaround of prime movers and trailers.

For hauliers, AMH has introduced a guideline that included a RM100 surcharge for the “restrictive time” given by customers to pick up and deliver containers to and from their premises.

According to the new guideline effective Dec 16, customers are free to determine the date of pick-up and delivery of goods, but when they restrict the time frame, for example, the goods must be delivered to their premises before 5pm, or the surcharge will be imposed.

The reduction in the free storage period was delayed from Jan 1 to July 1 in view of the current economic climate and the appeal by some quarters in the maritime community in Port Klang.

Shalimin said the move was not a profit-making initiative, but aimed at efficiency improvements where importers and exporters should be able to receive and deliver goods at any time.

“The RM100 is only a benchmark and is not fixed. This is one of the efforts as a preparation towards the reduction of free storage period at the ports,” he said, adding that hauliers still maintained 48-hour notification from customers for pick-up and delivery.

On another issue, Shalimin said, some manufacturers had kept trailers and containers for a relatively long period of time.

“In China, once an in-bound container arrived at the customer premise, the company only get one hour to clear the goods.

“Here, we left our trailers and containers where we come back to pick up the next day. Some companies have also kept our trailers for two to three days,” he said.

Shalimin added that the stalled trailers at exporters and importers premises meant extra cost for hauliers.

“They can be used for other deliveries,” he said.

On the issue of too many players after the industry was liberalised, Shalimin said the Government should continue to give haulage licences only to “real” operators. “We believe that there are people who do not operate the haulage business themselves when were given the licences.

“Small and medium-size players should have at least 30 permits,’’ he said.

The haulage industry was liberalised on April 1, 2006, after 31 years of government control.

On the recent fluctuation in oil prices and its impact on the haulage industry, Shalimin said the fuel adjustment factor (FAF) surcharge moved in tandem with oil prices.

“But the FAF is only calculated based on oil price. The prices of batteries, tyres and other spare parts that have gone up when oil price was at its peak are still the same.

“It is quite worrying for the industry, especially in this current economic condition, and the Government should look into the matter,” he said.

Source: Star Online

Slower production causes bigger stockpile in warehouses

LOGISTICS firms are experiencing an increase in raw material stockpile in their warehouses as manufacturers have slowed production due to falling demand.

The country’s trade is expected to be hurt even more this year due to its large exposure to the United States, especially for electronics and electrical products.

Also, falling commodity prices have affected Malaysia’s export and import of commodity-related materials such as fertilisers.

Transways Logistics (M) Sdn Bhd president and chief executive officer Edward Chan told StarBiz that the stockpile of raw materials occupied more than 50% or 30,000 sq ft of its warehouse space.

“The raw materials include plywood and fibre boards for the furniture industry that is currently facing falling demand. If this situation persists, we will look into the possibility of acquiring new warehouses,” he said.

He said Transways usually handled the distribution and inventory of the raw materials for its customers in Malaysia, Vietnam and China.

Chan said there was no indication how long it would take for the stockpile of raw materials to clear up as it very much depended on trade.

Infinity Logistics and Transport Sdn Bhd managing director Chan Kong Yew said the company’s warehouses experienced a sudden change in pattern, with slower turnaround for some of the stored materials.

“For imports, we are currently stockpiling or storing a lot of fertilisers. I think the plantation industry, especially oil palm, needs less fertilisers as the palm oil price continues to fall,” he said.

And for exports, he said, there were a lot of electronics product materials being stored at the company’s warehouses. Asked if the long storage of materials meant extra business, Chan explained that the warehouse business made more profit on moving goods rather than “dead” cargo.

“The faster the goods move in and out of warehouses, the more we earn,’’ he said. “But the current situation of increasing stockpile in warehouses in a sense would balance out the supply and demand for warehouses in Port Klang, which are currently facing an oversupply.”

Freight Management Holdings Bhd managing director Chew Chong Keat told StarBiz that the company was not experiencing any “long” storing of products that could be deemed as stockpiling.

“The inventory is a little bit more but electronics products and raw materials are still moving,’’ he said. “Maybe it’s due to how we have structured our service.”

Source: Star Online

Malaysia shipping sector seen entering rougher waters

ANALYSTS said Malaysia's shipping sector will face a more difficult environment this year, as transport volumes shrink given the tight credit conditions and weak demand.

HwangDBS Vickers Research Sdn Bhd said it expects the correction in petroleum tanker rates to persist as the supply of new vessels should continue to pressure rates until 2010 when the mandatory scrapping of single hull vessels deadline approaches as well as softer oil demand on expected global economic slowdown.

The Baltic Dirty Tanker Index had corrected by 44 per cent since it peaked on July 23 2008.

It maintains its "underweight" call on the logistics sector, but said a key risk to its call is significant scrapping of single hull vessels ahead of 2010.

"The outlook for container shipping remains challenging as transport volumes could shrink given the tight credit conditions and weak demand," HwangDBS Vickers Research wrote in a report last week.

For MISC Bhd, it expects the group's expanding heavy engineering and offshore divisions to partly cushion the weakness in petroleum tanker rates.

"The recent termination of the proposed reverse-takeover of Ramunia Holdings do not have material impact on MISC though it would need to seek for other available yards in an effort to expand its heavy engineering capacity. The group is a key beneficiary of Petronas' increased focus on deepwater projects," it added.

Sharing the same sentiments, OSK Research Sdn Bhd said the local shipping industry will face a difficult year in 2009, as it expects demand for new ships to reduce, which may avert the current oversupply of vessels.

"Overcapacity in container shipping has led to extremely low rates for all major trade routes, and major shipping lines are reducing capacity across the board," it said.

Source: NST Online