MMC hurt by low cargo volume

MMC Corp Bhd sees lower revenue contribution from its port business in Johor this year due to the drop in cargo volume, said chief executive officer Hasni Harun.

Both its ports in the state, Port of Tanjung Pelepas (PTP) and Johor Port, had been hit by the global recession, he said.

“Ports in the region have been experiencing a decline in volume of between 15% and 20% since the fourth quarter last year.

“There has been a spike in volume last month due to the replenishment of depleted inventories but it is premature to say whether this is sustainable.

“Subject to an improvement in consumer confidence globally, the situation may not lead to a long and deep downturn. It might improve in 2010 and we hope to maintain what we’ve achieved last year,” he told StarBiz.

»Ports in the region have experienced a decline in volume of 15% to 20% since the fourth quarter last year«HASNI HARUN

PTP registered a container throughput of 5.6 million twenty-foot equivalent units (TEUs) last year, up 1.8% against 2007.

Johor Port handled 17.2 million freight weight tonnes of bulk and conventional cargo in 2008, representing a growth of 8% year-on-year, and recorded 934,767 TEUs of containers last year, an increase of 1%.

The two ports contributed 14% to MMC group revenue in 2008 compared with 20% in 2007.

Hasni said the decline in percentage of contribution from its ports despite higher revenue was due to the increase in Malakoff Bhd’s revenue contribution, resulting from the 12-month consolidation of Malakoff’s results last year versus only eight months in 2007.

“Based on the current slowdown, we expect the revenue contribution from our ports to also be lower year-on-year,” he said.

On capital expenditure (capex), Hasni said PTP planned to spend RM400mil to RM500mil this year, which is lower than the RM900mil spent last year, in line with the slowdown in business.

“This year’s capex includes for additional equipment at existing berths (berths 9 and 10), which will further increase the port’s operational efficiency, as well as for the ongoing construction of berths 11 and 12.

“We are making prudent decisions on capex and will equip berths 11 and 12 progressively as global shipping trade improves,” he said.

Both of MMC’s ports in Johor – Port of Tanjung Pelepas and Johor Port (pic, below) have been hit by the global economic recession

He added that Johor Port also expected to spend a lower amount of capex this year, primarily for maintenance works.

Going forward, Hasni said PTP’s value proposition was in its strategic location, unrivalled potential capacity growth, connectivity and competitive rates.

“These attributes will continue to make PTP an ideal choice for shipping lines, particularly those that are restructuring their routes and collaborating with other lines to minimise costs under the current economic scenario.

“Meanwhile, Johor Port focuses on high-value cargo and commodities in the bulk and break-bulk terminals,” he said.

Besides port operations, MMC has finalised the acquisition of Senai Airport Terminal Services Sdn Bhd (SATS) in Johor for RM1.7bil.

According to Hasni, having interests in ports and an airport allowed the company to achieve better integration between the two modes of transportation.

“PTP is recognised as an ‘airport within a seaport’ and this further enhances the inter-modal movement of cargo from ships to airplanes and vice-versa.

“The acquisition of SATS will expand MMC’s logistics business, in line with its vision to be a global utilities and logistics group,” he said.

SATS is currently undergoing an expansion, including the extension of its runway from 3,354m to 3,800m, which will accommodate fully-loaded long-haul cargo flights.

“An Aero-Mall is also being built, which will add 6,500 sq m, bringing the total outlet space to 8,500 sq m to cater for the growing population residing within easy access of the airport. The mall is scheduled for completion in the first quarter of 2010.

“The airport also has a cargo capacity of 80,000 tonnes per annum and offers bonded warehouse and warehousing facilities,” he added.

Hasni said SATS’ potential would be realised with the development of Senai Airport City into a regional cargo and logistics hub.

Works on Senai Airport City, with a gross development value of RM10bil, would commence towards the year-end and scheduled for completion by 2020, he said.

Source: Star Online

Recovery not yet in sight for container sector

CONTAINER shipping companies returning to viable business conditions may still be a far-fetched scenario although the sector has seen a slight pick-up since last month due to improvements in global trade volumes and recovering rate charges.

Freight rates, usually determined by demand, fell more than 80% since the last quarter of 2008 due to falling global trades.

But shipping companies are now “restoring” rates spurred by the slight pick-up in demand and the need to at least break even in their operations.

Maersk Line, the world’s largest liner company, will increase its rates for the Europe-to-Middle East and South Asia trades effective May 1.

“Unsustainable rates and continued improved demand lead to rate increases,” said the company in a statement.

Maersk Line raised rates by US$100 per 20-footer container and US$200 per 40-footer container on eastbound services from Northern Europe, North Africa and Mediterranean to the Middle East and South Asia.

Since late last month, Maersk Line has been announcing rate increases that included North America-to-Mediterranean and North African trades, North America-to-Middle East and Indian-subcontinent trades as well as Europe-to-Asia trade.

CMA CGM, France’s largest liner company, also decided to implement a rate restoration exercise on its main trades on April 1.

United Arab Shipping Co (UASC) Malaysia Sdn Bhd country general manager, Desmond Yong told StarBiz that the rate restoration was only a measure for shipping companies to continue providing services rather than pulling out from certain trade routes.

“We just cannot lay up our vessels or pull ourselves from a trade route as there are still exporters and importers that need to do business,” he said.

He believed that the restoration was driven more by business survival rather than demand as the trade volume was only inching up.

“The container shipping sector has suffered so much that we cannot even meet our operating costs since the rate slump.

“For example, the freight rate in certain Asia-westbound trade routes are cheaper compared with the trucking cost from Selangor to Melaka,” he said, reiterating that the rate restoration was certainly not a profit-making move.

Jardine Shipping Services country manager Richard Tan said the restoration of rates would not even cover shipping companies’ operating costs.

“If there is any improvement in the container shipping business, it is expected from intra-Asia trade rather than Asia-US or Asia-Europe trade.

“This is because our financial institutions are still strong while countries with huge population, such as China and India are encouraging domestic population,” he said.

CIMB Research said in its latest sector update that a rebound would be more apparent in months to come and the uptrend would probably last for two to three quarters.

“This could be due to typical seasonal trend of restocking of inventories in the United States and Europe.

“We may actually see positive growth in the fourth quarter of this year,” it said.

The research house said container trade volumes could recover sequentially in the second and third quarter this year due to seasonal factors such as back-to-school shopping in the United States and the coming Christmas.

“Given the sharp decline in Asian exports and US/Europe imports over the past six months, we believe some level of restocking should materialise by the second and third quarter of this year.

“This will help boost volumes in the main East-West trades and provide a lift to spot container shipping rates.

“The key risk is continued weakness in retail sales in the major consuming nations, which may lead importers to maintain a lower baseline of inventory than before,” it said.

CIMB Research said another looming danger that might adversely affect the industry would be the supply growth of container vessels.

“The order book is currently about 50% of the existing fleet.

“Even after adjusting for negotiated delays, cancellations, slippage and scrapping, Drewry Shipping Consultants Ltd expects the global container fleet to grow by 10.5% this year, followed by 8% in 2010 and 5.4% in 2011,” it said.

Source: Star Biz

Whole supply chain will benefit, say hauliers

The liberalisation of the services sub-sectors, including the regional distribution centre (RDC) and international procurement centre (IPC), will attract more foreign investors to Malaysia, which will benefit the whole supply chain.

Association of Malaysian Hauliers (AMH) president Datuk Ahmad Shalimin Shaffie said the move was timely due to the drop in cargo volume which was affecting every player in the whole supply chain, including haulage.

The haulage business suffered a 40% decrease in volume in February on year-on-year basis but it has slowly picked up in March and April.

“The liberalisation has made Malaysia more attractive to foreign investors coupled with our world standard infrastructure. With the move, more multinational companies are expected to set up their operations here.

“The move is also in line with Asean’s trade liberalisation which will be implemented soon,” he said.

The RDC is a collection and consolidation centre for finished goods, components and spare parts to be distributed within or outside Malaysia. Among the value-added activities involved are bulk breaking, repackaging and relabelling.

The IPC undertakes procurement and sale of raw materials, components and finished goods for the local and international market.

Malaysian Logistics Council founding member Dr Mohamed Amin Kassim said that while the liberalisation of the RDC and IPC was good to attract more foreign investors to the country, the incentive should be extended to the logistics sector as well.

In the shipping sector, E.A. Technique (M) Sdn Bhd managing director Datuk Abdul Hak Mohd Amin welcomed the Government’s decision to liberalise certain segments of the industry.

“In the future, we may see large international shipping companies setting up their regional headquarters in Malaysia,” he said.

The liberalisation included rental or leasing services of ships which exclude cabotage and offshore trade as well as bareboat charter for international shipping.

Source: Star Online

Clean-up for Puspakom

KUALA LUMPUR: Puspakom will be the next frontline body to be given a “wake-up jolt” and a “clean-up” following the launch of an integrity plan for the Road Transport Department (JPJ).

In conjunction with the launch, two new bodies, the JPJ Stakeholders’ Panel (SP) and the Puspakom Moni­toring Board (PMB) were also formed yesterday.

Representatives from Non-Go­­vernmental Organisations, political parties and consumer associations received their appointments to sit on the panel and the board which will be overseen by Transport Minister Datuk Seri Ong Tee Keat.

Some of the appointees include Fomca secretary-general Mu­ham­mad Sha’ani Abdullah, Pan Malaysian Lorry Operators Association president Er Sui See and Automotive Association of Malaysia president Datuk Aishah Ahmad.

Ong said the panel and board would get together to monitor en­­forcement by JPJ and Puspakom as well as their effectiveness.

Good start: Ong signing a certificate to mark the launch of JPJ’s integrity plan in Kuala Lumpur Monday. With him is JPJ director-general Datuk Solah Mat Hassan (left).

“It will be a good platform for feedback and to keep an eye on the quality of service,” he said at a press conference.

Ong said JPJ’s integrity plan was a serious initiative that would act on complaints immediately while re­­ducing opportunities for corruption.

JPJ director-general Datuk Solah Mat Hassan said his department was in the midst of reviewing Puspakom procedures to speed up inspection times and that new standard operating procedures would be ready in two weeks.

“We will not compromise on the safety or comfort of passengers but there is a need to prioritise inspections on a want or need basis.”

Solah said it was necessary to ensure vehicles passed engine and brake tests but other tests such those that were cosmetic in nature were not as important.

“Right now there are more than 200 items that are checked and if the vehicle fails just one item, the vehicle would fail the test completely,” he said.

Solah said that for example if the passenger seat was torn on a lorry, it could be overlooked but not if the passenger seat was torn in a taxi or a bus.

Pan Malaysian Bus Operators Association president Datuk Ashfar Ali said the move would definitely curb corruption and would have far-reaching effects.

“The operators will know that they don’t have to be at the mercy of Puspakom for small things like the paintwork not being perfect,” he said.

Source: StarBiz

Slumping freight rates and demand hurt companies’ earnings

WANING freight rates in container, dry bulk and tanker segments will continue to plague Malaysian shipping companies’ earnings this year.

The freight rates are generally down due to slumping world trade, lower iron ore demand from the world’s largest steelmaker – China, and reduced Organisation of the Petroleum Exporting Countries (Opec) production.

Declining world trade has put downward pressure on container shipping freight rates that have so far declined more than 50% since the fourth quarter of last year.

Some Chinese shipping lines were even reported to have offered zero rates last month.

Datuk Ramesh Rajaratnam ... MMM is mitigating these impacts by practising natural hedging whenever possible

The Baltic Dry Index (BDI), the yardstick of dry-bulk shipping freight rates, slumped almost 92% at year-end from its peak of 11,793 points on May 20.

The index, however, has climbed up by 98.4% to 1,534 points on April 15 year-to-date.

The demand for tanker business, especially in the crude tanker segment, is forecast to drop by 13% this year. This will be due to Opec’s cut of 4.2 million barrels per day (bpd), reflecting a 15.6% fall from the August production level.

Aggravating the situation is the new supply of containerships, dry-bulk vessels and tankers that are going to flood the industry this year.

Three local shipping companies are already in the red due to the current downturn in the global shipping industry.

Malaysian Merchant Marine Bhd (MMM) posted a net loss of RM241,000 in its third quarter ended Dec 31. Its cumulative nine-month net loss amounted to RM4.9mil.

MMM owns one double-hull tanker and two hybrid tankers.

According to executive deputy chairman Datuk Ramesh Rajaratnam, the losses were mainly due to the depreciating greenback against the ringgit.

“Our revenues are in US dollars whereas most of our costs, historically determined, are denominated in ringgit.

“However, we are mitigating these impacts by practising natural hedging whenever possible. In addition, tanker charter hire rates have also fallen by about 30%,” he told StarBiz.

He said MMM was in the midst of restructuring its businesses by disposing of its loss-making ventures and vessels and replacing them with a new fleet.

In the financial year ended March 31 (FY08), Ramesh said three old vessels were sold.

“We were supposed to rebuild our fleet with six new vessels but the plan is delayed due partly to the financial crisis and the Sichuan earthquake,” he said.

MMM was to receive four 9,000-deadweight tonne (dwt) double-hull tankers from Oceanic Shipping Pte Ltd under a bare boat charter with a conditional option to purchase agreement.

The first vessel that was supposed to be delivered in February is now rescheduled to August.

“The unforeseen events delayed our revenue-generation ability and return to profitability this year,” he said, adding that MMM’s accounts were still being finalised but “we expect to record a significantly reduced loss this year compared with FY08’s RM50mil loss.”

Another shipping company sailing in troubled waters is Nepline Bhd that recently fell under the amended PN17 status.

Bank Pembangunan is calling for receivership on three of its vessels in repayment of loans amounting to RM44.8mil. Via receivership, the receiver will collect all revenues generated and the profits will be used to pay off the company’s debt.

Nepline was reportedly unable to generate income from its vessels due to dry-docking earlier this year. It posted a net loss of RM2.9mil in its fourth quarter ended Dec 31 compared with a net profit of RM12.6mil in the previous corresponding period.

PDZ Holdings Bhd, which operates about 10 small to medium container vessels, is another casualty of the slumping freight rates and demand.

The company posted a net loss of RM2.6mil in its second quarter ended Dec 31 compared with a net profit of RM3mil in the previous corresponding period.

PDZ said the outlook for the months ahead appeared grim.

“To ride out the storm, we are implementing cost-cutting measures as well as suspending services that are likely to incur losses,” it said in a statement.

On the other hand, Malaysian Bulk Carriers Bhd (Maybulk) still registered profit despite the collapse in BDI last year.

According to an analyst with a local research house, the BDI – which is currently at 1,500-point level – could still be considered healthy.

“Although it hit 11,000 points last year, the current level is still high by historical standards,” he told StarBiz.

However, he said, the downward pressure to the index this year would be less due to iron ore import from China and new vessels coming into the marketplace.

Maybulk posted a 96.9% drop in net profit in its fourth quarter ended Dec 31 to RM4.96mil against the same quarter previously. Revenue for the period shrank 36.2% to RM138.1mil.

For the full year, it suffered only a 9.7% drop in net profit to RM521.7mil while revenue increased 18.6% to RM721.2mil.

MISC Bhd, with its diverse portfolio in energy transportation, container shipping and offshore businesses, could still record a hefty profit albeit at a lower growth in the current financial year ending March 31, 2010.

This is despite the current collapse in container and crude tanker freight rates and demand.

“This is because most of its liquefied natural gas (LNG) vessels are in stable long-term contracts,” said a shipping analyst with a local brokerage. MISC is the world’s largest single owner-operator of LNG fleet of 27 vessels.

Additionally, its offshore shipping and heavy engineering businesses are doing well despite the global economic downturn.

According to the analyst, container freight rates would see little recovery this year but was expected to show early signs of revival next year.

“The present container freight rates has declined about 80% from its peak early last year and the crude tanker market is not doing well either.

“These are the factors that will pull down MISC’s earnings in FYO9 and FY10,” he said.

MISC recorded RM249.6mil in net profit in its third quarter ended Dec 31, a drop of 76.7% against the previous corresponding period.

Source: StarBiz

Complaints Against Puspakom

Under the Malaysian Road Transport Act all commercial vehicles are required to undergo an inspection every 6 months.

The inspection process is conducted by a monopoly operated by Puspakom which is a subsidiary of DRB-Hicom.

Malaysian logistics players, particularly haulage and transport operators have suffered and, are still suffering the inefficiencies of the monopolistic Puspakom.

Some may recall this Bernama report on May 8, 2008:

Corruption Tops Complaints Against Puspakom

KUALA LUMPUR, May 8 (Bernama) -- Corruption forms the bulk of 392 public complaints lodged against the Computerised Vehicle Inspection Centre (Puspakom) from 2001 to 2007, the Dewan Rakyat heard Thursday.

Transport Minister Datuk Ong Tee Keat said other than corruption, the public were also unhappy that they had to queue up for long hours to get services.

He also told Chong Eng (DAP-Bukit Mertajam) that the Puspakom staff implicated had been warned or sacked.

He said Puspakom had also grown over the years from 31 branches in 1994 to 64 branches currently.

"Operating hours at seven inspection centres had also been extended from 7am-7pm on Mondays to Fridays and 8am-1pm on Saturdays," he said, adding that 19 additional inspection centres were also opened in rural and remote areas in Sabah and Sarawak although the locations were not included in the concession agreement.

Ong added that business at centres located in outlying brought low returns as only an average of 36 vehicles came for inspection daily compared to the 100-500 daily at the main centres.
______________________________

There is plenty of anecdotal evidence from Malaysian logistics players to suggest the following issues that the Ministry of Transport should seriously look into on an urgent basis, particularly during this period of economic downturn:

• Too much time is wasted by commercial vehicles waiting for the inspection.

• The location of Puspakom centres are not well-thought out. The most glaring instance is why Port Klang, which is the commercial gateway into Malaysia, does not have a vehicle inspection centre. Operators lose vehicles for entire days during the inspection period. Many have full-time dedicated drivers just to drive commercial vehicles to Puspakom!

Port operators report higher volume in March

PETALING JAYA: A number of port operators in the country have reported higher throughput volume for March but are cautious about volume going forward as the signs of recovery are still weak.

According to them, imports and exports as measured by twenty-foot equivalent units (TEUs) were up for March while transhipments – the shipment of goods to an intermediate destination before moving to another destination – were also up.

Westports Malaysia Sdn Bhd executive chairman Tan Sri G. Gnanalingam had noted earlier in a commentary that in March, Westports’ total volume, including imports, exports and transhipments, was up 10% compared with the previous three months.

He said the immediate question that came to mind was whether these were signs of recovery or if this was due to inventory corrections after managers cancelled their orders between October and December last year.

“As such, between April and June, we’ll begin to notice that the world will not only reinstate its inventory levels but also increase its orders simply because life must go on,” Gnanalingam said.

Captain Ismail Hashim, chief executive officer of Port of Tanjung Pelepas Sdn Bhd, which operates the number one transhipment port in the country, said volume grew 23% to 469,000 TEUs for March compared with February.

He said it was tricky to accurately predict the underlying reasons behind the recent increase in volume. “Whether the increase is sustainable over the longer term remains to be seen,” Ismail told StarBiz in an e-mail reply.

He said if the recent upturn was due to restocking of manufacturers’ orders as a result of them halting production abruptly earlier on when the crisis first started then the spike in volume could be “just a temporary pattern.”

Penang Port Sdn Bhd general manager Obaid Mansor said the Butterworth container terminal saw a bottoming in January when throughput was 30% lower than October 2008.

“The upturn in business was really registered in the export transhipment trade provided by our industrial hinterland,” he said, adding that a combination of improved demand for manufactured products, re-stocking, trade credit availability and demand from China and India could be the factors that contributed to an improvement in volume.

Source: Star Business

Move to simplify administration of licensed warehouses, free industrial zones

THE Malaysian Government is seeking industry feedback on the streamlining of operations of licensed manufacturing warehouses (LMW) and free industrial zones (FIZ).

The streamlining of operations will result in the implementation of the Export Processing Establishment (EPE), aimed at simplifying procedures for the movement of goods and minimising and standardising customs control and administration in these two dedicated manufacturing areas.

Goods produced in these two areas are largely for export.

An aerial view of the Free Industrial Zone in Bayan Lepas, Penang.

The EPE plan, which is still on the drawing board, was presented recently by representatives of the finance ministry during a dialogue session with investors.

The FIZ is governed under the Free Zones Act 1990 while the LMW is under customs laws, according to Rajadorai C.K. Pillay, an assistant project director at the finance ministry.

“For the movement of goods, LMW is subject to documentary control by the Customs Department while FIZ is subjected to 24-hour physical checks by the department.

“Also, FIZ is deemed to be outside Malaysia while LMW can be established anywhere in the principal customs areas.

“Another primary difference between the two is that FIZ is controlled by the free zone authority while LMW is controlled by the customs,” he said.

Rajadorai added that while services used in FIZ were not subject to service tax, LMW operators had to pay service tax.

“But goods and raw materials directly used in the manufacturing process in LMW and FIZ are not subject to import duty and sales tax,” he said.

To date, there are 343 companies operating in FIZ and 1,905 in LMWs.

Rajadorai said the EPE would streamline the differences between LMW and FIZ, resulting in seamless flow of goods, simplified Customs control and procedures, cost effectiveness and a faster turnover time for manufacturers.

According to the plan, EPE will be governed under principal Customs areas similar to LMW.

“We have proposed that the Free Zone Act and Customs Act (Section 65) be revoked. We will come up with a new provision for EPE.

“Under the new provision, companies operating in both FIZ and LMW will enjoy minimum Customs formalities and control,” Rajadorai said, adding that the EPE would have to be licensed under the Customs Act.

“Under the EPE, raw materials and components used directly in the manufacturing process will be exempted from duties and taxes.

“There will also be duty exemptions for machinery and equipment used in the manufacturing process,” he said.

But some participants at the dialogue argued that the implementation of EPE without any rigid authority would make the free zones highly accessible to any type of company wanting to set up operations there.

Currently, free zones are dedicated to manufacturers that export 80% of their goods.

“This will mislead foreign direct investors on the purpose of our free zones that are supposed to be a dedicated place for export-driven manufacturers,” one participant said.

Another participant also expressed concern that the EPE would be in direct competition with local small and medium enterprises.

Rajadorai, however, said the EPE would retain the quota for export and domestic usage.

“That is why we need the feedback and opinions before the EPE is implemented. Industry players are encouraged to contact the finance ministry to voice out their opinions,” he said.

Source: Star Online

Swettenham Pier set to welcome larger vessels

The cruise terminal is expected to be completed by September 30, says Transport Minister Datuk Seri Ong Tee Keat

PENANG is set to welcome larger cruise ships and passenger vessels by September, when the much-delayed redevelopment of Swettenham Pier is finally completed, Transport Minister Datuk Seri Ong Tee Keat says.

The project, which took off in May 2006, was originally scheduled for completion in April last year. Among its components is an international cruise terminal.

"The cruise terminal is expected to be completed by September 30. As of April 1, the project was 86.5 per cent completed," Ong told Business Times via e-mail.

Last year, the Transport Ministry unveiled a discrepancy of RM3.5 million in a claim for progressive payment from the contractor of the redevelopment project for the pier.

Ong said in August that the contractor had sought RM5.4 million as progressive payment in documents dated March 21 last year when the value of the work was RM1.92 million.

He said the discrepancy was discovered a few days after he took over as minister.

It is now learnt that the project is likely to only exceed its RM65 million tag slightly, and that the original contractor is seeing to the completion of the project.

Sources said the contractor was not terminated because the project would be further delayed if new tenders are to be called, and there was a likelihood of the work costing considerably more.

"However, the ministry has laid very strict conditions on the contractor now, and one of them is that all sub-contracting jobs and payment are to be made by the Penang Port Commission (PPC)," a source said.

"The PPC is seeing to the necessary arrangements to ensure that the project is back on track," Ong said.

"Liquidated and ascertained damages of RM15,000 per day are also being imposed on the contractor for the delay," he added.

On when the new terminal will be open, Ong said: "It will be operational when it receives the occupational certificate from the local authorities."

Source: Business Times

Why the Pirates Are Winning the Battle of the Seas

When the statistics showed a drop in piracy attacks off the coast of Somalia early this year, shipping companies and the foreign navies patrolling the Gulf of Aden thought they might finally be winning the battle of the Indian Ocean. But the past few days have proved that any talk of "mission accomplished" is premature.

The past week saw at least six attacks, culminating with the seizure of an American-flagged cargo ship with a crew of 20. Though the crew quickly regained control of the ship, the pirates are still holding the captain, Richard Phillips, hostage.

There are several reasons for the spike in attacks. For impoverished Somalis, who appear to be behind most of the attacks, massive ransom payouts in recent months have proved that the piracy trade is perhaps their best route out of despair and hopelessness. It now appears that the earlier drop in attacks had more to do with the weather than with the international show of force. "There are new pirates all the time," Abdi Timo-Jile, a pirate himself, told TIME from his home in the central city of Garowe. "We people are not afraid. There is death every day."

Pirates, ex-pirates and pirate recruiters tell TIME that even with all the international attention, the tough talk from leaders around the world and the presence of warships from 20 or so of the most powerful navies, the lure of the piracy trade remains as strong as ever. It only takes a few pirates to hijack a massive vessel, and shipping companies continue to pay out ransoms — in some cases more than $3 million — to secure the release of those precious cargo carriers. Given Somalia's miserable state, the temptation is irresistible.

It doesn't help that Somalis have a marked aversion to foreign forces. Fiercely conservative and suspicious of outsiders, the country bristled under the failed U.N. peacekeeping mission in the early 1990s and the Ethiopia occupation over the past few years. "The sea and the land are the same," says Abdinaser Biyokulule, a pirate recruiter in the pirate haven of Bossaso. "Foreign troops did not succeed on land, so they will not succeed in the sea either."

Stepped-up patrols around the Gulf of Aden were designed to intimidate the pirates. But the recent attacks, including hijackings and attempted hijackings hundreds of miles farther down the East African coastline, show that the Somalis are just changing tactics and moving away from the heavily patrolled gulf. "It's not that the navies have been unsuccessful," says Tony Mason, secretary-general of the London-based International Chamber of Shipping. "You can almost argue that they've been too successful, so the pirates have decided it's easier to go after targets in the Indian Ocean because the navies are not there and it's a much, much more difficult area to patrol because there's an awful lot more sea."

The international community was hopeful in March when Kenya agreed to try suspected pirates in its courts. That, experts said, would provide a deterrent and at least impose some sense of rule of law off Somalia's coasts. Yet the threat of arrest has done nothing to dissuade the pirates. "Not even 0.2% of the total pirates are arrested, so anybody who is at all intelligent can understand that arrest does not bring fear," says Maryam Jama, a pirate recruiter in Bossaso. "If you get arrested, in prison the others will say, 'Do not worry, you will be out and then hijack another ship with good luck.' "

Source: Time

'Up to Port Klang Authority to release findings on PKFZ'

THE onus is now on the Port Klang Authority (PKA) to release the long-awaited findings of a PricewaterhouseCoopers (PwC) audit on the Port Klang Free Zone (PKFZ) project.

Manager Port Klang Free Zone Sdn Bhd had engaged the services of PwC last year to conduct an independent overall audit on the accounts of the PKFZ project after a public outcry over the RM4.6 billion "soft loan" given by the government.

Transport Minister Datuk Seri Ong Tee Keat said the audit had been completed and it was now up to PKA, which owns PKFZ, to release the findings.

"Prior to this, we need to seek reclassification of certain documents relevant to the investigation. The critics wouldn't know. They just want to question why, when and what," he told reporters after launching the MCA Job Fair in Kuala Lumpur yesterday.

On when the findings would be made public, the minister said that it was "solely at the discretion of PKA" as the authority had engaged PwC's services.

Asked whether he would give a directive to PKA to release the findings, Ong said: "Ask them (PKA)."

The PKFZ project first raised eyebrows when PKA bought 405ha on Pulau Indah in 2002 for RM1.088 billion, or RM25 per sq ft, from Kuala Dimensi Sdn Bhd.

Kuala Dimensi had bought the undeveloped property in 1999 from a local cooperative for RM95 million, or RM3 per sq ft.

PKA's land purchase was followed by RM1.845 billion in development costs for the free trade zone.

The government later agreed to extend a loan of an unspecified amount to the heavily-indebted PKA to help cover the total cost of PKFZ, which had ballooned to RM4.6 billion, including interest and other charges.

Late last year, PKFZ executive chairman Lim Thean Shiang had said that the price of the land bought from Kuala Dimensi was reasonable as it included the infrastructure and had taken into account the holding period.

The cost-analysis study by PwC will help decide whether the government paid too much for the land.

PKFZ is the government's biggest investment in the port industry since 1990.

Source: Business Times

DOCUMENTS MUST BE DECLASSIFIED SAYS PKA

Elsewhere it is reported thus:

THE Port Klang Authority (PKA) expects to release the findings of PricewaterhouseCooper's (PwC) cost-analysis study on the Port Klang Free Zone (PKFZ) by month-end, its general manager said.

PKA general manager Lim Thean Shiang said that while it was true the report had been done, PwC had yet to hand it over to the port authority.

The audit firm is awaiting the declassification of certain documents protected under the Official Secrets Act (OSA).

" ... because PwC signed a privacy agreement, they were allowed to view the documents under the Act, but in order for the study to go public, we need to declassify the documents," Lim told Business Times in a phone interview.

Source: Business Times

Hijacked ship's captain is unharmed: Maersk

The captain of a US aid ship taken hostage after his vessel was hijacked by Somali pirates is alive and well, the Danish shipping company Maersk said Thursday.

The Maersk Alabama, which is owned by Maersk's US subsidiary Maersk Line Ltd, had 20 American crew members aboard on Wednesday when the attack happened.

"Most recent contact with the Alabama indicated that the captain remains a hostage but is unharmed at this time," Kevin Speers, a US-based spokesman for Maersk, told reporters in Norfolk, Virginia where Maersk Line Ltd has its headquarters.

"The safe return of the captain is our foremost priority. Everything we've done over the past day has strived to increase the chance of a peaceful outcome," he said.

The guided missile destroyer USS Bainbridge arrived on the scene of the standoff early Thursday. Speers said the warship was "in command" of the situation.

The attack took place in waters 500 kilometres (310 miles) southeast of the Somali town of Eyl.

The unarmed crew regained control of the ship some hours later, but the pirates fled the ship taking the captain as a hostage.

Source: AFP

MISC eyes small shipping firms

MISC Bhd, the largest shipping company in Malaysia, may take advantage of the current downcycle in the industry to acquire smaller units or subsidiaries of “troubled” shipping companies at lower prices.

An AmResearch analyst told StarBiz that MISC would be doing relatively well if a small acquisition took place despite the gloomy environment that had affected trade, the lifeline of the sector.

“MISC has stable revenue from its liquefied natural gas (LNG) tankers business with 70% to 80% of the vessels on long-term contracts where the earliest will expire only in 2013,” he said, adding that the global downturn had an insignificant impact on these secured contracts.

MISC is the world’s largest single owner-operator of LNG tankers with a fleet of 27, which is expected to expand to 29 this year.

MISC’s offshore business and huge order book from its heavy engineering division via subsidiary Malaysia Marine and Heavy Engineering Sdn Bhd (MMHE) will keep the group busy for the next 12 to 30 months.

According to a recent report by the research house, these three divisions now collectively account for 100% of the company’s pre-tax profit.

Also, the analyst said, MISC had secured a credit line of about US$1bil last year to part-finance its fleet growth and other purposes.

MISC’s underperforming businesses are in the container shipping and chemical tanker divisions.

The report said MISC would likely take over a unit of a financially-troubled shipping company similar to the American Eagle Tankers (AET) acquisition in 2003.

MISC bought AET at a 10% discount when Neptune Orient Lines Ltd auctioned it due to its high debt level and loss-making operation.

AET, now a wholly-owned subsidiary of MISC, was purchased at an equity consideration of US$445mil, or US$1.1bil inclusive of net debt.

“Although MISC’s gearing immediately rose to 66% post-purchase of AET, natural de-leveraging from healthy free cash flow brought the gearing down to 17% in 2006,” said the report.

MISC’s net gearing for the financial year ended March 31 (FY09) is forecast to stand at 0.3 times while international peers in its league, such as General Maritime Corp, Aries Maritime Transport Ltd and Taiheiyo Kaiun Co Ltd, were already in the red with stretched balanced sheets at two to 13 times net gearing.

The report said although prospects of the acquisition seemed challenging in the immediate term, MISC’s profitability was a factor supporting the move.

The research house’s earnings forecast for MISC in FY09 is at RM1.4bil compared with RM2.4bil in FY08. Its nine-month earnings for the period ended Dec 31 was at RM1.2bil.

It is also possible that MISC is eyeing another oil and gas fabrication yard since the proposed reverse takeover of Ramunia Holdings Bhd via the injection of subsidiary MMHE for RM3bil did not materialise in November.

But, according to the analyst, the chances were slim as there were only a few fabrication yards in Malaysia.

“Additionally, MMHE had already expanded its land size by 50% to cope with the increasing demand via leasing the land next to its location.

“But, we are not ruling out this possibility that the yard acquisition may replace the takeover of the shipping unit,” he said.

Despite the rosy outlook, MISC is not immune to the effects of the shipping downturn, as it has two underperforming businesses, namely the container shipping and chemical tanker divisions.

The report said the net profit of RM250mil in its third quarter was 24% lower year-on-year as it was dragged down by these two divisions due to oversupply of vessels in the marketplace that had hurt freight rates, especially for container ship.

“Container ship deliveries are expected to rise to 1.7 million 20-foot equivalent units (TEUs) this year and 1.8 million TEUs in 2010, adding an estimated 14% and 13% capacity respectively to the existing fleet.

“As a response to the oversupply situation, measures have been taken by container ship operators to reduce available capacity in the market by laying off vessels and scrapping old vessels to restore freight rates at healthy levels,” it said.

According to Clarkson Research, idle container space in the fleet in February amounted to 800,000 TEUs – equivalent to more than 300 vessels – accounting for 6.5% of available fleet in the beginning of the month.

But the analyst said the losses suffered by these two divisions could be offset by the earnings of its LNG tankers, heavy engineering and offshore operations until the economy stabilised.

Source: Star Online