Cost Of PKFZ Project May Balloon To RM12.453 Bln

The cost of the Port Klang Free Zone (PKFZ) project rose to RM7.453 billion including interest from RM1.957 billion originally.

Excluding interest, it would cost RM3.522 billion, audit firm PricewaterhouseCoopers (PwC) said in a report entitled "Position Review of Port Klang Free Zone Project and Port Klang Free Zone Sdn Bhd" released here Thursday on the PKA website.

PwC said it was imperative for Port Klang Authority (PKA), the operator of PKFZ, to take immediate action to restructure the Ministry of Finance's (MOF) soft loan of RM4.632 billion to avoid a potential default in 2012.

If PKA fails to meet the MOF's soft loan instalments, it would further increase the cost of the project to RM12.453 billion, said PwC.

PKA has projected it will be in a cumulative cash deficit position in 2012 and will not be able to repay MOF's soft loan instalments from that time on.

"The Malaysian government would need to make a concerted effort to turn PKFZ into a viable venture," it said.

PwC said the strategic intent of the project was to transform Port Klang into a national load centre and regional transhipment hub, but "significant project costs, weak governance and weak project management have severely undermined the viability of the project".

PKA's project management and control over the project was weak.

The Cabinet approved the project in 1999.

PKA was unable to fund its obligations to Kuala Dimensi Sdn Bhd (KDSB) from its own resources when the first scheduled payment was due in 2007.

It secured a 20-year soft loan of RM4.632 billion from MOF, of which RM4.382 billion is available for drawdown.

"This loan would impose an additional interest cost of RM2.506 billion resulting in a project total outlay of RM7.453 billion," said PwC.

PKA purchased the land outright at a price of RM25 per sq ft on the basis that the land was of special value but Jabatan Penilaian dan Perkhidmatan Harta had in August 2001 placed a value of RM10.16 psf on the basis of compulsory acquisition.

"Compulsory, had it been possible, would have cost a total of RM442 million compared to the purchase price of RM1.088 billion (that is RM25 psf).

The audit firm said KDSB could "may have overcharged PKA for interest between RM51 million and RM309 million in connection with the purchase of the land and that the land was acquired at special value which exceeded market value".

PwC said PKA and the Ministry of Transport also failed to alert the Cabinet in a timely manner about PKA's inability to pay for the project out of its own funds.

"PKA was aware that it was not able to meet the Cabinet's condition for self-financing (and) PKA should have alerted the Cabinet of this important fact," it said.

To compound the issue, PKA entered into other very significant development agreements thereafter, PwC said.

PwC said there were a general lack of board oversight, including it not being informed of key project consultants as well as variation orders (VOs) of RM62.5 million.

Several government checks and balances were bypassed, such as the Attorney-General (AG) not vetting some of the agreements despite significant amounts involved and PKA's lack of experience in projects of this nature while Treasury guidelines on vetting of agreements by the AG and approval of VOs by the MOF were not adhered to.

"Letters of support, which could be construed as guarantees, were issued by the MOT without the approval of MOF.

PwC said development contracts totalling RM1.846 billion were all awarded to KDSB without competitive bids.

KDSB is the turnkey contractor to design and build the infrastructure and complete the mulit-billion ringgit PKFZ.

KDSB was also the former owner of the land on which the project was developed.

PwC said that "there could be potential conflicts of interest arising from the involvement of parties who had prior association with either the land or KDSB".

"We should also mention PKA's apparent reliance on approvals by senior government offices such as the Cabinet, MOT and prime minister," it said.

While such approvals are important, the board still retains the overall responsibility to run PKA in a professional and sustainable manner.

"This would include the responsibility to not enter into agreements which may threaten PKA's long-term financial viability," it said.

PwC also said the project's actual occupancy of 14 percent is low and is not generating sufficient revenue to cover its operating expenses.

"The government will need to undertake a concerted effort involving a number of agencies in order to turn the PKFZ into a financially viable venture," PwC said.

It said the principal activities of KDSB, a wholly-owned subsidiary of Wijaya Baru Holdings Sdn Bhd (WBHSB), are construction and property development.

WBHSB and its group of companies are involved in land and sea reclamation, construction, dredging, property developemnt and marine transport activities.

As of Jan 16, 2009, the shareholders of WBHSB comprised Datuk Seri Tiong King Sing holding a 70 percent equity, Idris Mat Jani (10 percent) and Omar Abdul Latip (20 percent).

The directors of KDSB are Tiong, Idris, Omar and Datuk Seri Abdul Azim Mohd Zabidi.

PwC also noted that a number of parties with prior association to either the land or KDSB which may give rise to potential conflicts of interests.

It said that Datuk Abdul Rahman, who was a member of the board from 1997 to 2003, declared his position at one meeting as president of Koperasi Pembangunan Pulau Lumut Bhd which was the original owner of the land.

Another person was Datuk Chor Chee Heung, who was non-executive deputy chairman of Wijaya Baru Global Bhd (WBGB) from April 2004 to July 2007 and chairman of PKA from April 2007 to March 2008.

In February 2008, the final account for the DA3 (Development Agreement 3) of RM1.216 billion was approved by the board.

KDSB carried out the construction works under the DA3 between July 2004 and November 2006, during which time Chor was the non-executive chairman of WBGB.

Minutes of the board did not indicate that Chor either declared his previous involvement in WBGB to the board or withdrew himself from the deliberations.

WBGB and KDSB are related through a common shareholder and director.

WBGB and the parent company of KDSB, Wijaya Baru Holdings Sdn Bhd, share a common shareholder and is the main contractor of KDSB for the project.

-- BERNAMA

Malaysian economy contracts 6.2pc in Q1, recession inevitable

KUALA LUMPUR, May 27 - The Malaysian economy is worse than expected, contracting 6.2 per cent in the first quarter from a year ago, its worst fall since the fourth quarter of 1998 at the height of the Asian financial crisis.

It is the first time in eight years that the gross domestic product (GDP) has experienced a quarterly contraction which also translates to a drop of about 7 per cent from the last quarter of 2008.

Bank Negara also believes that it has continued into the second quarter and while the central bank is confident of improvements in the second half of 2009, governor Tan Sri Zeti Akhtar Aziz would not say if Malaysia would return to positive growth this year.

The government had expressed optimism that the export-driven economy will return to growth in the third quarter after slumping in the first half of 2009 as exports plunged.

Prime Minister Datuk Seri Najib Tun Razak had already cautioned the government will revise down its forecast for Malaysia to weaken by one per cent for most of 2009

“The second quarter will be very similar to the first. But there will be improvements in the second half,” Zeti said.

She explained that measures taken to strengthen the economy, which includes two government stimulus packages amounting to RM20 billion to be spent this year, may support positive growth in the last quarter and into 2010 if the situation externally is favourable.

Despite admitting that two quarters of negative growth would be considered a recession, Zeti refused to be drawn on whether Malaysia has slumped into one.

“We are now in very exceptional circumstances,” she said, explaining why making forecasts is difficult.

“We already anticipated a very slow growth as the financial crisis has become more prolonged than earlier expected and the deterioration in global economy was far greater than expected,” Zeti told reporters.

The hardest hit sector in the quarter was manufacturing which was down 17.6 per cent although construction, which has been a key element in the stimulus packages, managed to register a 0.6 per cent growth.

The services sector was also down 0.1 per cent after it had grown by 7.2 per cent for 2008 with the transport and storage sub-sector shrinking by 3.9 per cent, its first drop since 2003.

The country’s short-term growth depends on a global recovery boosting demand for its electronics, oil and commodities exports and also on Asian giant China’s consumption holding up.

Najib, who is also Finance Minister, has said Malaysia will have to change its economic model in order to generate future growth, adding he would concentrate on innovation and creativity particularly in services for Asia’s third-most export-dependent nation.

Najib will announce a new GDP forecast tomorrow.

Source: Malaysian Insider

Maersk Line well placed to ride out financial crisis

Maersk Line has worked upon enhancing its operational efficiency, driving costs out, improving profitability and simplifying its organisational structure, says its managing director

MAERSK Line, the world's largest container shipping line and a unit of Danish shipping group A.P. Moller-Maersk, said there continues to be considerable uncertainty about the future of the shipping industry for the rest of the year, due to the development in the global economy.

"These uncertainties relate to the development in container freight rates, transported volumes, the US dollar exchange rate and oil prices," Maersk Malaysia Sdn Bhd managing director Omar Shamsie told Business Times via email.

Maersk Line saw its cargo volume globally fall 14 per cent year-on-year in the first quarter of this year, due to a slowdown in trade activity amid the global economic crisis.

However, it managed to maintain its market share in the declining container shipping market.

Last year, Maersk Line posted flat growth in total cargo throughput at 6.2 million FFE (40-foot equivalent units).

"The market is really bad - no one has escaped the wrath of the global economic crisis. All companies have been hit to varying degrees and some have been better dressed than others to deal with it," said Omar.

Omar, however, said Maersk Line is better positioned than its competitors to ride out the current financial crisis, having embarked upon a shift in its strategy globally in early 2008.

"We had embarked upon the shift ahead of the crisis, where, among others, we have worked upon enhancing our operational efficiency, driving costs out, improving profitability and simplifying our organisational structure. This has allowed us to deal with the crisis from a sturdier footing," he said.

These initiatives to restore Maersk Line's profitability are starting to pay off.

"We have documented an increase in satisfied customers, we are number one on schedule reliability, our invoice quality has never been better and we have made significant cost savings on bunker.

"We are ahead of our competitors on many important areas. This forms a good platform to further strengthen Maersk Line's competitiveness," said Omar.

The shipping line has also re-worked and rationalised some of its services, where traffic has dropped.

At the same time, it has added and improved its services on main shipping routes such as the all-water service to the US East Coast, which was launched at the end of May 2008.

Maersk Line also saw its average freight rates drop 24 per cent in the first quarter of this year, from the same period in 2008.

The drop in freight rates is in tandem with the international market.

"Generally, freight rates across all trades have fallen to unprecedented levels. The current freight rates are simply unsustainable and must be restored back to levels where the industry can breathe and support trade efficiently. If not, we may see the demise of additional operators," warned Omar.

"Many shipping lines, including Maersk Line, have rationalised its services and additionally are currently pursuing rate restorations in various trades such as the Middle East, Europe and Oceania," he added.

He said Maersk Line's customers have, by and large, been supportive of its need to restore freight rates.

"They, too, appreciate that a status quo (in freight rates) would ultimately lead to the trade and end-users being impacted due to reduced services, capacity and frequency.

"We aim to maintain our position in the major markets we serve and will thus, work with our customers and responsibly try to turn the situation around through phased rate restorations," he said.

On the local front, Omar said container traffic to and from Malaysia and Singapore remains weak since the start of this year.

"Rates and consequently, our (Maersk Malaysia's) profitability have been negatively affected," said Omar, adding that it has not made any of its 200-odd staff across its five Malaysian offices redundant as a result of the crisis, as yet.

On his plans for Maersk Malaysia this year, Omar said it will work to restore its freight rates to and from Malaysia, keep its costs down and increase its operational efficiency, high service delivery and customer satisfaction.

"Winning in today's market place is about getting closer to the customer. This is more crucial then ever. We want to get closer to our customers, improve our service and boost our competitiveness," he said.

Source: BusinessTimes

Shippers spend extra to ward off pirate attacks

The rampant piracy attacks off the coast of Somalia, a major sea lane for the world’s oil transportation, are costing shipping companies an arm and a leg to install extra security measures.

Some have even opted to avoid the high-risk area by taking a longer journey via the Cape of Good Hope.

Pottengal Mukundan ... These options to avoid or repel the pirates are not cheap.

More than 30% of the world’s oil is transported through the Gulf of Aden, off the coast of Somalia.

International Maritime Bureau director Captain Pottengal Mukundan said about 22,000 vessels transited the Gulf of Aden annually and it was the main shipping artery from Asia and the Arabian Gulf to Europe and vice-versa.

“To avoid being the victim of pirates in that area, ship owners are installing extra security measures such as unarmed security personnel on board and installation of razor wires around vessels.

“Some even re-route their journey via the Cape of Good Hope that translates into two to three weeks’ extra journey to reach Europe.

“And these options to avoid or repel the pirates are not cheap,” he said at the Kuala Lumpur International Conference on Piracy and Crimes at Sea organised by Foreign Affairs Ministry last week.

According to International Association of Independent Tanker Owners (Intertanko), re-routing a tanker en route from the Arabian Gulf to the east coast of the United States, via the Cape of Good Hope instead of using the Suez Canal, would increase costs by about 30%.

Intertanko represents about 80% of independent tanker fleet globally.

However, the extra precautions are necessary to avoid falling victim to pirates off the coast of Somalia whose modus operandi includes hijacking of vessels and kidnapping of crew which can result in a more expensive costs in terms of paying ransom money, and losing multi-million dollar worth of cargoes and vessels.

The Somali pirates were reported to have earned about US$80mil in ransom payments last year.

And pirate attacks can also cause cracks on a tanker that might result in oil spill, which will be detrimental to the local marine environment.

According to the association, about 22% of the ships attacked by pirates off the coast of Somalia since last December were tankers.

However, Intertanko regional manager (Asia-Pacific) Tim Wilkins said there were no reasons to believe that tankers were specifically targetted by pirates in that area.

“It is based on random attacks to vulnerable vessels,” he told StarBiz, adding that 80% of the attacks were prevented by the vessels’ self-protection measures.

On the question of paying the ransom money or not, Mukundan said that in Somalia, where there was no mechanism to help shipowners whose vessels were hijacked and crew kidnapped, paying the ransom seemed to be the only option for now.

International Maritime Organisation (maritime security and facilitation) deputy director Nicolaos Charalambous said shipowners needed to be extra vigilant when transiting the high-risk area.

“I note that shipping organisations worldwide are trying to educate their members. But some ship operators take the matter light-heartedly,” he said.

In a presentation titled Overview of The Global Piracy Situation, Charalambous said that generally, the acts of piracy and armed robbery against ships had been declining and the numbers for 2007 and 2008 were heavily influenced by the situation in the waters off the coast of Somalia.

“The east and west coasts of Africa account for 61% of the total number of incidents reported globally last year and 75% of the incidents reported since Jan 1 this year,” he said.

Source: StarBiz

Syariah shipping fund to ride on next upcycle

THE joint-venture syariah-compliant shipping fund by Kuwait Finance House Labuan (KFHL) and SFS Group Public Co Ltd, which will be available by the year-end, aims to ride on the next upcycle of the shipping industry.

KFHL, a wholly-owned subsidiary of Kuwait Finance House (Malaysia) Bhd, and SFS recently entered into an agreement to set up the fund via limited partnership in the Cayman Islands.

The targeted fund size of about US$150mil is to be managed by an equally-owned company acting as a general partner based in Cayman Islands.

The fund’s objective is to invest directly in shipping assets, primarily vessels.

Ab Jabar Ab Rahman...'The partners held a long-term view of the maritime industry'

All investments will require approval of Kuwait Finance House’s syariah committee.

Kuwait Finance House Malaysia deputy chief executive officer Ab Jabar Ab Rahman told StarBiz that the two partners held a long-term view of the maritime industry.

“Thus, we are positioning ourselves for the next upcycle when asset prices are low.

“We believe that this particular sub-sector (offshore) will continue to have commendable growth prospects in the medium to long term,’’ he said.

On investment in other shipping divisions, Ab Jabar said the tankers sector could also be considered and that it would be in line with their growth and value strategies.

“However, acquisitions in the container ship segment will be given thorough consideration as it poses certain syariah complications such as the element of uncertainty (Gharar).

“This is because we are not allowed to engage in the transportation of prohibited goods such as pork and liquor,” he said.

Kuwait Finance House Malaysia began operations in August 2005 and is a wholly-owned subsidiary of Kuwait Finance House K.S.C.

A full-fledged Islamic bank, Kuwait Finance House Malaysia has a paid-up capital of US$500mil and a further US$100mil in Tier II capital.

SFS is a leading non-bank financial institution in Cyprus, established in 1988. It is actively involved in financial services, capital markets and alternative investments.

SFS has been listed on the main market of the Cyprus Stock Exchange since 1999. Its total assets and shareholders’ equity at the end of 2008 were 303 million euros and 127 million euros respectively.

Source: StarBiz

HSBC takes in RM100m from marine cargo insurance

HSBC Bank Malaysia Bhd’s marine cargo insurance garnered businesses worth more than an insured value of RM100mil within the first month of introduction.

The marine cargo insurance was introduced to complement the bank’s one-stop trade solutions for its commercial customers, ranging from small to medium-scale enterprises (SMEs) to multinational corporations.

Trade and supply chain director Vivek Gupta said the initial response from customers, especially SMEs, had been excellent as it appealed to the customers’ needs for convenience and value-for-money solutions.

Vivek Gupta...'The introduction of the marine cargo insurance reinforces HSBC's focus on meeting customers' needs.

“When we first introduced it in April, we secured businesses in excess of RM100mil coverage. As such, I am confident that we will see an ongoing momentum for this customised proposition,” he said in a statement.

He said the introduction of the marine cargo insurance initiative reinforced HSBC’s focus on meeting customers’ needs with a comprehensive suite of products and services.

“We not only bring about cost efficiency to our customers in terms of competitive pricing and a single contact point, but we are also able to help advise and educate customers on this key risk mitigation,” he said.

He said HSBC Malaysia’s import customers would now have the convenience of insuring their single voyage shipments within the same day of submitting documents at any of the 19 trade and supply chain centres at HSBC branches nationwide.

This provides convenience to customers as they only need to approach the trade specialists at the centres for their insurance requirements.

With this, customers can now enjoy both single shipment voyage cover as well as marine open-cover policies at competitive rates.

This initiative further strengthens HSBC Malaysia’s reputation as a premium provider of a comprehensive suite of trade and supply-chain solutions in the local market.

Having been around since 1884, the bank continues to maintain its leading market position in the trade and supply-chain business in Malaysia.

This is reflected by various industry recognitions and accolades awarded to the bank, the most recent being The Best Trade Finance Bank in Malaysia 2009 from The Asset.

Marine cargo insurance is designed to provide protection on companies’ cargo shipments between countries against uncertainties.

The insurance covers the companies’ cargo against risks during shipment by sea, air or land.

Source: StarBiz

Westports sees first volume drop

WESTPORTS Malaysia Sdn Bhd, one of the fastest growing ports in Malaysia located in Port Klang, expects its volume to contract for the first time this year since it started its container business in 1996 due to the global economic meltdown.

The port, which was established in 1994, expects to record about four million 20ft equivalent units (TEUs) this year, which would mean a 19.5% fall from 4.97 million TEUs achieved last year.

According to executive director Ruben Emir Gnanalingam, container volume for the first-quarter this year saw a decline of 15% to 16% year-on-year.

Ruben Emir Gnanalingam says the decline affected all types of cargo

“And the downtrend continued in April as well.

“March had the highest volume so far this year with 355,431 TEUs.

“The decline affected all types of cargo – import, export and transhipment,” he told StarBiz.

He said the drop in volume was in line with the decline observed in other major ports in the region.

But, he added that the average daily volume at Westports had showed signs of stabilising in recent months compared with the sharp decline recorded earlier.

“Thus, we are also expecting lower turnover this year in tandem with the decrease in volume,” he said.

Westports posted a revenue of RM984mil last year, up 19% from 2007.

Due to the slowdown, Ruben said Westports would not embark on any infrastructure expansion this year.

“We spent about RM600mil last year on expansion that has elevated our capacity to 7.2 million TEUs without any congestion possibility. The current capacity is more than enough to operate our business for now.

“Thus, we do not have any capex plans this year and we will re-look at expansion plans at the end of next year.

“This is because we do a long-term expansion plan. We completed container terminal (CT) 5 last year and, according to our plan, we can go up to CT9 or even to CT11 if the environmental condition permits,” he said, adding that Westports’ expansion was mainly supply driven.

Also, according to Ruben, Westports would use the less busy business environment to upgrade its efficiency.

“We are now operating at 100% berth on arrival compared with our busier times’ berth on arrival of 75% to 80%. This is the best time to upgrade our system as we are not that busy.

“Other than that, we are also retraining our staff so that they are ready to give their best on the next upcycle of the industry.

“We want to upgrade our efficiency of moving containers from the current average of 36 moves per hour to over 40 moves,” he said, adding that Westports had a policy of not retrenching its staff due to the economic slowdown this year.

Currently, the port has about 3,400 employees.

On the reduction in the free storage period to three days from five at Port Klang, tentatively effective from July 1, Ruben said the five days – by industry standard – were considered more than ample time given to exporters and importers to clear their goods at the port.

“The port is not a storage facility regardless of the economic situation and whether it is congested or not.

“Other ports in the region have shorter free storage period as well,” he said.

Source: StarBiz

Kuala Lumpur International Conference on Piracy and Crimes at Sea

Malaysia is taking a proactive role to combat piracy via the Kuala Lumpur International Conference on Piracy and Crimes at Sea organised by the Foreign Affairs Ministry.

The two-day event, which starts on May 18, will be officiated by Foreign Minister Datuk Anifah Aman.

The conference aims to share the region’s experience in fighting piracy in support of the global effort to eradicate the problem against the backdrop of escalating piracy activities in the Gulf of Aden.

The growing number of attacks on merchant ships has been observed off the coast of Somalia since 2005.

This has alarmed the international community because the Gulf of Aden is an important trade lane connecting the Red Sea, Suez Canal and the Mediterranean Sea.

The condition has since worsened with about 40 ship attacks and about 90 attempted attacks reported. The majority of the incidents occurred in the Gulf of Aden last year.

It has also been reported that the Somali pirates earned about US$80mil in ransom payments in 2008.

The papers concerning the matter will be presented by prominent industry decision makers, organisations and stakeholders.

They include the International Maritime Organisation, United Nations’ special representative from Somalia, International Maritime Bureau, International Association of Independent Tanker Owners, Maritime Institute of Malaysia and the US Coast Guards.

Source: StarBiz

Consumer sector to spur China shipbuilding

THE long-term sustainability of China’s shipbuilding industry may be supported by the demand to increase domestic fleet based on its strengthening consumer sector, said Lloyd’s Register group strategy director John Stansfeld.

“China’s economic development has been predominantly driven by globalisation where its economic strategy mainly focuses on industrial exports.

'The availability of credit is another major issue' - JOHN STANSFELD

“And the country’s shipbuilding industry has reflected this in its order book with the majority of ships built or on order are contracted by foreign owners.

“But now, with the emergence of a strong consumer base that flourished under the forces of industrialisation, the question is whether China can rely on the purchasing power of its emerging consumers to keep its factories busy and by implication, its demand for raw materials and energy strong, if external demand for manufactured goods remains weak,” he said.

Speaking at the China Shipping Energy Conference in Shanghai recently, Stansfeld said this would, in turn, fuel the demand for more ships for the domestic fleet and helped strengthen its emerging marine supply chain.

“The question is whether the growth potential in the domestic fleet will sustain output levels during this unprecedented downturn and support the development of new maritime capabilities,” he said.

Stansfeld said China’s state planners appeared to believe that part of the solution was in the China Shipbuilding Industry’s adjustment and revitalisation plan in response to the adverse impact of the recession unveiled in February.

He said the initiatives in the six-point plan include a determination to spur demand for new ships by speeding up the replacement of China’s ageing domestic fleet.

“A reduction in the maximum age for coastal trading vessels is one solution being discussed.

A filepic of a shipyard in Dalian. The emergence of a strong consumer base will fuel the demand for more ships for domestic fleet in China. - AFP

“The plan is expected to provide the impetus for a long-awaited structural reform of the industry and its products.

“It will also provide the incentives for expansion-minded shipping companies to buy any ships whose construction might otherwise be terminated by a lack of financing or the inability to negotiate new terms,” he said.

Additionally, Stansfeld said China’s demand for energy and the related raw materials would play a key role in determining its future as a maritime nation.

“The development and sustainability of its maritime sector will be underpinned by the commitment to import energy and other raw materials in Chinese-built, owned, managed and crewed ships.

“The ambition to transport 50% of the country’s energy needs in Chinese-owned and operated tonnage is common knowledge.

“Increasingly, we see Chinese owners and yards investing in oil tankers and their design development growing due to Chinese oil imports,” he said.

However, Stansfeld said, the future of maritime industry was also primarily determined by other factors, most of which were beyond the control of the shipping sector.

“The obvious and principal driver for a recovery is an improvement in global trade, which itself is dependant on the economic health of nations. The price of energy will also be a major factor, influenced by the demand of the revitalised economies,” he said.

Stansfeld said this would, in turn, have an impact on the costs of all manufactured goods and the price of raw materials used in the manufacturing sector. “The availability of credit is another significant issue and influence,” he said.

Source: StarBiz

BDI seen to average 2,000 points this year

THE Baltic Dry Index (BDI), the benchmark for commodity shipping rates, is expected to average around 2,000 points this year, based on upswing in demand from the world’s major raw material importer, China.

According to an industry analyst from a local research house, the movement of the index is usually influenced by iron ore and coal shipping, especially to China.

Bloomberg reported coal imports to China rose 36% from a year earlier in March. The country shipped in a record 53.5 million tonnes of iron ore last month.

Coal and iron ore account for almost 50% of commodities shipped on dry-bulk vessels. The dry-bulk vessels currently make up almost 40% of the world’s merchant fleet.

“I expect the index to continue fluctuating for the rest of the year, averaging around 2,000 points for 2009,” he told StarBiz.

On whether the average 2,000 points will provide a healthy margin for dry-bulk vessel owners, he said it would depend on the initial cost of the ships, which was also highly fluctuating according to demand.

The BDI rose to 2,194 points on May 7, closer to its peak so far this year at 2,298 point on March 10.

The index has been steadily rising since April 29, advancing by 23.8% to 2,194 points on May 7.

The lowest level this year was recorded on Jan 5 at 772 points.

On the stability of the index amid the global financial crisis this year, the analyst said the prospects for dry-bulk market was still weak due to imbalance in supply and demand growth.

“The global dry-bulk fleet as at end of last year was about 400 million dead-weight tonnes (dwt) and Platou, a ship broker firm, forecasts the scrapping of 20 to 30 million dwt this year, equivalent to 5% to 7.5% of the global fleet.

“But the ship brokerage also forecast about 55 million dwt in new deliveries this year, on the assumption that 25% of 2009 deliveries will be delayed.

“This translates into a 6% net fleet growth in comparison with negative demand growth in the global recession. I would say the prospect for dry bulk is still pretty fragile,” he said.

Source: StarBiz

Landbridge gets itself ready for better times

The container haulage operator, which started its operation in March this year, is investing in 20 Mercedes-Benz prime movers, 100 trailers, a depot building and haulage software system

LANDBRIDGE Haulage (M) Sdn Bhd, a new container haulage operator, is investing some RM15 million to strengthen its position for when the market recovers.

It is spending the money on 20 new Mercedes-Benz prime movers, 100 trailers, a depot building and haulage software system.

Chief operating officer Azmin Yusoff expects the economy to rebound by the year-end, by which time it will be ready to seize the opportunities.

"We are very confident that the company will not be affected by the current economic slowdown as it has the business backing of major customers who have signed up long-term contracts with the company," Azmin told Business Times.

With its fleet of new prime movers, Landbridge is confident of providing efficient and reliable services to its customers.

It hopes to have 100 prime movers in the next four years and expand its coverage across Peninsular Malaysia.

Landbridge is the latest container haulier to enter the industry. It started its operation in March this year with an initial capital of RM3 million.

It is helmed by Azmin, former chief executive of Kontena Nasional Bhd, who has more than 26 years experience in the local haulage industry.

"The industry is big enough to accommodate a few more players," he said.

Landbridge's depot and office in Westports was officially opened last week by Datuk Markiman Kobiran, chairman of the Commercial Vehicles Licensing Board.

Source: Business Times

Cargo volumes seen picking up in H2

CMA CGM & ANL Malaysia Sdn Bhd, the top main-line operator at Westports Malaysia, sees cargo volumes picking up in the second half of the year.

“Actually some of our volumes are picking up and hope to see some signs of recovery as soon as this month, so it’s coming,” said managing director Simon Whitelaw in a statement.

According to Whitelaw, although the French liner experienced a small drop in the first quarter of this year, it saw an increase in local boxes compared with the corresponding period last year.

CMA CGM Vela at Westports is the world's third largest container shipping company.

He sees a slight recovery in April, May and June and a further pick-up in volumes in the second half of the year.

While making improvements in its services from Asia to the Mediterranean (westbound), parent company CMA CGM, the world’s third largest container shipping company, will also introduce two new services, one of which is to Mozambique, Africa, starting from the middle of this month.

“We are looking at new services, especially to Africa which is doing very well.

“Additionally CMA CGM will offer upgraded service coverage to Western and Central Mediterranean from Asia.

“Starting from the middle of this month, CMA CGM will enter into a new vessel sharing agreement with Maersk, providing a vessel of 8,500 twenty-foot equivalent units (TEUs) capacity.

“The new service will allow wider port coverage,” Whitelaw said.

Rotation of the new service will be as follows: Lian Yun Gang, Qingdao, Shanghai, Fuzhou, Hong Kong, Chiwan, Yantian, Tanjung Pelepas, Jeddah, Port Said, Gioia Tauro, Genoa, Fos, Gioia Tauro, Damietta, Port Said, Salalah, Port Klang, Singapore, Lian Yun Gang.

The service will be operated with nine vessels of about 8,500 TEUs.

Whitelaw also pointed out that CMA CGM would revamp its PHEX/LEVEX service from Asia to the Adriatic.

The new service will focus on the Adriatic region with faster transit times to Trieste, Koper and Rijeka.

Rotation will be as follows: Shanghai, Busan, Hong Kong, Chiwan, Tanjung Pelepas, Port Kelang, Port Said, Damietta, Trieste, Koper, Rijeka (by feeder), Damietta, Port Said, Jeddah, Port Klang, Singapore, Shanghai.

This joint service will be operated with eight vessels of 6,500 TEUs.

“A new US East Coast, West Coast pendulum service commences in May, while a revised Black Sea service (BEX) also commences in May with direct calls at Westports and Tanjung Pelepas.

“So, despite the current economic situation, CMA CGM is planning and committed to the recovery expected in 2010,” Whitelaw said.

Source: Star Biz