High ship order may result in oversupply, says consultant

The current record high global shipping orderbook may create long-term oversupply problems in the dry-bulk, container shipping and tanker sectors, according to Drewry Shipping Consultants Ltd.

Managing director Nigel Gardiner said base-case projections indicated that the newbuilding requirement to satisfy incremental increases in ship demand and the need to replace scrapped ships by 2013 would be about 97 million compensated gross tonnes (cgt).

However, the current orderbook and scheduled deliveries for this period was double that figure, he said in a statement on the Drewry New World Shipbuilding Review and Forecast 2009/10 report.

“The projected newbuilding requirement rises to 120 million cgt over the period 2014 to 2018 and to 139 million cgt up to 2023.

“In these periods, the newbuilding requirement is quite large because of the need to replace ageing parts of the world fleet,” he said.

However, he said the more intense focus was on the next five years, when the dry-bulk sector provided a good example of the problems confronting shipbuilding and shipping alike.

He said there were 6,864 bulk carriers, or 422 million deadweight tonnes, in service early this year.

Source: StarBiz

Stable logistics cost seen till year-end

The cost of logistics for land transport and warehousing is expected to remain stable throughout the year, according to industry players.

This is because Malaysia’s logistics cost for the two segments is already among the lowest in the region and, therefore, not severely impacted by the drop in import and export volumes.

Logistics players are more concerned about the slower turnaround time of goods in their warehouses and distribution centres due to sluggish demand.

The slower turnaround time in warehouses has affected logistics firms’ in come.

Freight Management Holdings Bhd (FMH) managing director Chew Chong Keat told StarBiz that fees in the local logistics scene would remain stable in the second half of the year.

However, he said, the company would continue to monitor fuel price movements, which is one of the three major factors that influence the cost of logistics.

“The other two major factors are financing or borrowing rates, which have seen no huge increase in Malaysia, and manpower, which is sufficient currently compared with last year.

“Some local logistics providers are only seen to provide discounts of 10% to 15%, depending on the package and volume of goods,” he said.

Chew noted that the turnaround time of goods in warehouses had been slower compared with the pre-global crisis period.

Going forward, he sees a slight improvement in the volume of goods compared with the 10% to 15% drop in the first quarter of this year.

On its results for the third-quarter ended March 31, which saw a 14.3% drop in net profit to RM2.8mil year-on-year, Chew said extraordinary gains of RM1.1mil from the disposal of a barge in the previous corresponding quarter contributed to the decline. “At the operating level, we are still better than 2008 for that particular quarter,” he said.

On the performance for the full-year ending June 30, Chew said FMH expected to remain profitable although the growth momentum might not be as bullish as last year.

Similarly, Century Logistics Holdings Bhd deputy managing director Mohamed Amin Kassim saw little change in logistics cost in the country amid the weak economy.

“Our rates are already among the lowest in Asia and a further decrease will only hurt local players.

“However, container haulage rates may have dropped from last year, with the current rates generally lower than the guidelines provided by the haulage association,” he said.

Air and sea freight had also recorded a slight drop in rates, he added.

Amin said the more pressing issue was the slower turnaround time of goods in warehouses, which had affected income.

“Usually, the turnaround time is 10 days to two weeks but now, some goods have been sitting in our warehouse for a month.

“Due to the slower turnaround, logistics players lose out on cargo-handling fee,” Amin said, adding that some brands of fast-moving consumer goods were still recording healthy turnaround time.

On Century Logistics’ weaker results for the first-quarter ended March 31, he said they were due to the high base effect from special logistics projects done a year ago, coupled with the drop in volumes early this year.

The company saw its net profit shrinking to RM1mil in the first quarter from RM9.8mil in the previous corresponding period.

“But in the second quarter of this year, we have seen an uptrend in volume for certain logistics activities due to our diversified services and value-added products. I hope this positive development is sustainable,” he said.

Source: StarBiz

Maersk says container mart may shrink 10pc this year

A.P. Moeller-Maersk A/S, owner of the world's largest container shipper, said cargo volumes may drop more than 10 per cent this year and show no growth in 2010 as the industry suffers a "completely unprecedented" decline.

"We will have a substantial loss this year and next year will be equally difficult," Eivind Kolding, chief executive officer of the Copenhagen-based company's Maersk Line container unit, said yesterday in an interview. "We have been quite disappointed by the market development in April and May."

Container numbers will fall 10.3 per cent in 2009, Drewry Shipping Consultants Ltd said last week after predicting a 5.3 per cent contraction three months earlier.

Drewry's forecast is "a fair estimate" and the industry may "actually see a bigger decline" after volumes tumbled 15 per cent in the first five months, Kolding said.

A "worrying" balance between supply and demand won't reach a "fair" level until 2015, he added.

The container industry, which transports manufactured goods by sea, is in its first year of contraction as consumers in Western economies rein in spending. The market has expanded by more than 10 per cent most years since the global industry started in the 1970s. The worst year until now was 1982, when the market grew 4.6 per cent, according to Drewry.

Freight prices have also dropped as shipping lines compete for a declining number of contracts and new vessels ordered during the boom period enter the market. Rates are down to 1990 levels, Kolding said, pushing operating margins to "record lows."

"Getting lower down from this point will actually mean you have to pay the customer to take his business," the executive said. "There is a floor and we are quite close to that now."

London-based Drewry predicts that global container-market capacity will grow 8 per cent this year and 10 per cent in 2010. The industry will lose a combined US$20 billion (US$1 = RM3.55) before interest and tax, compared with a US$5 billion profit in 2008, it says.

Maersk Line, which operates 470 vessels and owns 1.9 million containers, lost US$559 million in the first quarter of this year as its rates dropped 24 per cent from a year earlier and volumes fell 14 per cent.

It will seek to cope with the decline by cutting costs and improving customer relations to hold on to its 15 per cent global market share, said Kolding, 49. It won't try to take orders from competitors, he said.

Parent A.P. Moeller-Maersk, Denmark's largest company by sales, also owns the Nordic region's second-largest oil and gas explorer, a 20 per cent stake in Denmark's largest bank, Danske Bank A/S, and a tanker unit. The group said May 12 it may have a net loss this year, the first since World War II, because of the container unit.

The container industry will consolidate over coming years once trade picks up, Kolding said, adding that he has no regrets over Maersk's two biggest acquisitions, the 1999 purchase of Sea-Land Service Inc . and the 2005 takeover of Royal P&O Nedlloyd NV.

Maersk Line, which transports about 20 per cent of China's container goods, has reduced its labour force to 17,500 people from 23,000 at the beginning of 2008 and will cut more jobs, Kolding said, declining to give a specific number.

Source: Business Times

Tanjung Agas Oil, Gas and Maritime Industrial Park

The Government will look into ways to create a new economic model, emphasising more on the services sector, said Prime Minister Datuk Seri Najib Tun Razak.

Citing the Tanjung Agas Oil, Gas and Maritime Industrial Park, Najib said the project was a good example of a critical change in spearheading the country’s growth and wealth.

“Based on the development scale of the proposed park, it will be able to meet the demands and needs of oil and gas dredging activities in Malaysia and Asean region.

Sultan Ahmad Shah, Tengku Abdulah and Najib looking at a model of a tanker at the Tanjung Agas Oil, Gas and Maritime Industrial Park.

“At present, the services sector contributes about 54% of the Gross Domestic Product and our hope is to increase it further to 70% in the coming years.

“The shift will mark Malaysia’s coming of age as a knowledge-based economy in our quest to be an industrialised country,” he said in his speech during the ground-breaking ceremony of the project by Sultan Pahang Sultan Ahmad Shah here yesterday.

Also present were Tengku Mahkota Tengku Abdullah, Tengku Muda Tengku Abdul Rahman who is also the chairman of Tanjung Agas Supply Base & Marine Services Sdn Bhd, the project’s concessionaire, and Mentri Besar Datuk Seri Adnan Yaakob.

Najib, who is Pekan MP, said the Federal Government would give full backing to the project dubbed the “Maritime Bay of the East,” which would act as a one-stop centre with advanced service facilities and offshore base.

He said under the first phase, some 5,000 job opportunities would be created. It is projected that the park will provide 30,000 jobs over a 10-year period.

The RM2bil park, spread across 1,833ha, comprises a shipyard, a fabrication yard, a dredger yard, a logistic base, a vessel lay-up anchorage as well as facilities for petroleum storage and blending.

In Tanjong Karang last night, Najib warned enforcement officers in local authorities to not pressure hawkers and petty traders but instead help them in their businesses.

“Enforcement officers have much contact with traders and it is these officers that should lend a hand or even advise those without licences to apply for one and not put pressure on them,” he said.

Earlier, Najib attended the gathering of the Federation of Malay Hawkers and Petty Trader where some 5,000 people attended at the Padang Astaka field in Tanjong Karang. Najib also handed over RM500,000 to the federation.

Also present were Najib’s wife Datin Seri Rosmah Mansor and the federation’s president Datuk Ramli Norani.

Najib will open and deliver the keynote address at the 7th Heads of Mission Conference at Putrajaya International Convention Centre tomorrow.

The conference with the theme “Malaysian Foreign Policy: Future Direction for 2009 to 2015” from June 21-27 begins with the 4th Honorary Consuls Meeting from June 18-22.

Cabotage: Some shipping industry players support open policy

While the local shipowners deem the recently-announced partial relaxation of the cabotage policy as untimely, some quarters of the local maritime industry think otherwise.

The Government had partially liberalise the cabotage policy for containerised transhipment cargo for the sectors between the Port of Sepangar, Bintulu, Kuching with Port Klang and the Port of Tanjung Pelepas and vice versa effective June 3.

The liberalisation will allow foreign vessels to carry containerised transhipment cargo within the above sectors without a need for a domestic shipping licence.

According to a prominent industry player, the liberalisation was inevitable in the long run, especially if Malaysia wanted to be more competitive.

“It opens up opportunity for importers and exporters in Sabah and Sarawak as well as the industries to enjoy a lower freight cost due to competition in the shipping transportation sector, which can be translated into cheaper price of consumer goods and industrial needs.

“Additionally, the move will allow the two east Malaysian states to lure international shipping lines to the country,” he said, adding that it would also benefit the ports in Sabah and Sarawak as well as to the economic development corridors there.

When international shipping lines can go directly to Sabah and Sarawak, they can take suitable cargo for the Far East and the US markets as opposed to coming to Singapore or Port Klang before they go to the Far East or China.

An industry observer said the Federation of Sabah Manufacturers also recently reiterated the need to abolish the policy, saying that the move could also pave the way for the Kota Kinabalu Sepangar container port to become a hub for the Brunei, Indonesia, Malaysia and the Philippines-East Asean Growth Area (BIMP-EAGA) region.

“It must be noted that even after the policy is relaxed and international shipping lines travel to east Malaysia, they will at most call one or two ports in Sabah or Sarawak.

“However, ports like Sepangar, Bintulu or even Kuching can vie to become a hub port for the BIMP-EAGA region and be a getaway for shipment of cargoes to the Far East,” he said.

In general, he said, there was still a lot of cargo in Bangladesh, Myanmar and India, which local Malaysian shipping lines can target.

Source: StarBiz

Cabotage: Shipowners plea to defer liberalisation

Malaysian shipowners are appealing to the Government to defer its unexpected decision on the relaxation of the national cabotage shipping policy.

The local shipowners, represented by the Malaysian Shipowners’ Association (MASA), said the decision to partially liberalise the cabotage policy and allow foreign shipping lines in the domestic trade should be held back at least until the economy, now in technical recession, recovered.

“It is bad enough that the national cabotage policy was relaxed to allow foreigners in the transhipment trade between Port Klang and Tanjung Pelepas in Peninsular Malaysia and that of Kota Kinabalu, Kuching and Bintulu to compete in a limited market but it will be worse if the policy is relaxed immediately when the shipping market is in the doldrums,” said MASA chairman Nordin Mat Yusoff.

Under the cabotage shipping policy, implemented since 1980, domestic trade between any two ports in the country can only be served by Malaysian-owned shipping companies with Malaysian-flagged ships.

The partial relaxation of the cabotage policy took effect on June 3.

Nordin said most of the Malaysian operators in the domestic trade faced severe financial and operational problems as well as low freight rate and excess capacity in the market as a result of the collapse of the freight market.

MASA, representing more than 85% of the shipowners in the country, felt let down by the Government, as it had a duty of care for Malaysian shipowners and to protect national interests since cabotage was even recognised by the World Trade Organisation as an instrument of national policy.

MASA said the Government must also give the market players sufficient notice of its intention to relax the cabotage policy and not change such a key national policy overnight in the mid-stream and placing local operators under dire straits and severe consequences.

Adequate notice would at least prepare local players in the trade to take up position by reviewing their operational strategies or strengthen and build up capacity to compete “instead of unceremoniously pulling the rug under our feet,” said Nordin.

Several MASA members, especially those who have just ordered new ships to be deployed in the domestic trade, could face severe financial losses, the association pointed out.

“While we are perplexed with the dramatic manner the policy is being relaxed, we are also disturbed to note that there is lack of details in the Government’s decision, particularly in the need for continuous monitoring and feedback mechanism on how the relaxation of the cabotage policy works,” said Nordin.

He felt that the Transport Ministry should hold a dialogue with the Customs and port terminal operators at the specified ports to ensure that there would be no abuse or deviation following the relaxation of the policy.

Nordin also called on the Government to invite MASA to help monitor and assess the achievement and if the targets were not met the Government should reinstate the policy. He urged the Government to address current problems faced by the local shipping industry following the economic meltdown by introducing remedial measures in the economic stimulus package.

“Such measures should also include subsidy on port charges for domestic operators, financial assistance to help overcome cashflow problems and assistance to overcome loan repayment problems,” he said.

Source: StarBiz

French shipping giant CMA CGM keen to strengthen presence in Malaysia

Malaysia’s liberalisation of 27 local services sub-sectors, including the transport sub-sector, prompted French shipping giant, CMA CGM to mull over plans to strengthen its foothold in the country.

Transport Minister Datuk Seri Ong Tee Keat had during a visit to the headquarters of the world’s third largest container shipping company in the French city last Thursday shared the Malaysian Government’s policy to liberalise the transport sub-sector, including the opening of 30% restriction in foreign ownership.

CMA CGM has had a presence in Port Klang since 1994 and is one of the largest customers of Port Klang. It has since June 1 also served the port of Tanjung Pelepas.

In welcoming the move, the company’s president Jacques R. Saade said “such liberalisation will change the strategy (of the company) in Asia.”

The shipping giant also welcomed Ong’s announcement of gradual liberalisation of cabotage of key sectors such as from Peninsular Malaysia to three major ports in east Malaysia, namely Sepangar, Kuching and Bintulu. (See also page 7)

Saade said the company would seriously explore the opportunities available from such a move. He also said the company would expand its dry port bonded warehouses, which include the Port Klang Free Zone.

Later, Ong visited the Port of Marseille, one of the oldest and busiest sea ports in France.

Marseille Port also raised its interest to establish an in-house university specialising in shipping and maritime as part of its education and training project.

Ong took the opportunity to test-drive its state-of-the-art port simulator.

Shipping Association of Malaysia sees demand fall

The Shipping Association Malaysia (SAM) expects a 20% contraction of throughput volume this year due to the fall in demand and overcapacity.

Chairman Ooi Lean Hin said the projection was in line with the current global containerised volume decrease.

“So far, we have seen similar percentage decrease at 20% year-to-date in Malaysia compared with the same period last year,” he told a press conference on its rebranding exercise that saw the association unveiled its new name, SAM, from the International Shipowners’ Association of Malaysia.

Ooi said the maritime landscape would see the survival of the fittest for shipping companies in the next 12 to 18 months where the issue of excess capacity was still a looming problem of the industry.

According to SAM vice-chairman Abdul Aziz Toha, the total number of idling ships as at early this month stood at 533 ships with an estimated total capacity of 1.3 million twenty-foot equivalent units.

“That also translates to about 10% excess of the global capacity,” he said. That would be further compounded with new deliveries that would be expected to flood the market this year.

Ooi said cancellations of shipbuilding orders would not be that easy but deferment of deliveries would be a likely solution.

AmResearch in its recent sector update said it remained sceptical of significant improvement in the container sector any time soon.

“Container vessel delivery is backloaded, with bulk of deliveries in the second half of this year continuing to next year, adding capacity by 27% over next two years.

“And globally such fleets are very young with limited scrapping potential – leaving little scope for supply-glut mitigation.”

On its rebranding objective, Ooi said it would allow SAM to reach a wider spectrum of the maritime industry while streamlining its focus to better represent its members in the prevailing operating environment.

Previously, the association membership had been restricted, under its constitution, to ship owners which are represented by either the shipowners’ local offices or their local agents.

“With the major revamp of the rules and objectives of the association, SAM expects to attract new members from local shipping agencies, domestic carriers, box operators and barge operators.

“It is the objective of SAM to eventually unite all organisations in the maritime sector under a single association rendering a much stronger and unified voice,” said Ooi.

He added that SAM expected to double its current membership of 25 members by year-end.

Logistics facilities demand a boost

Areas with excellent road network in Klang Valley are hot spots for industrial property sector.

The performance of the industrial property sector will be led by demand for logistics cum warehousing facilities in specific areas in the Klang Valley.

According to CH William Talhar & Wong’s (WTW) first quarter 2009 property market report, these areas include Klang, Shah Alam and more recently, Kota Damansara that have an excellent network of roads and access to major highways – a prerequisite for international logistics providers.

“Some hot spots identified for the industrial property sector include Temasya Industrial Park in Glenmarie, Bandar Sultan Sulaiman Industrial Area in Klang, Port Klang, Section 15, Shah Alam and Selangor Science Park in Kota Damansara,” the report says.

Some notable industrial transactions that took place last year included a 2.6-ha industrial site at Seksyen U8 Shah Alam that was disposed at RM11.15mil and a 9.84-acre industrial site at Bandar Sultan Sulaiman in Klang was acquired at RM27.1mil.

“In 2008, a few manufacturing plants ceased operations including Ford Malaysia’s production and assembly facility in Seksyen 15, Shah Alam, Panasonic’s Sungai Way facility after the operations were moved to Seksyen 16, Shah Alam and the closing of Hitachi Consumer Products’ manufacturing facility in Bangi,” it says.

On its outlook for this year, the report notes that the Malaysian economy is not expected to be fully insulated from the global downturn.

“The full heat of the global crisis is expected to be felt in the second half of 2009 with the market continuing to remain soft. Consumer confidence is not expected to improve with the state of the economic outlook (eg: loss of jobs, pay cuts and reduction in manufacturing output),” it says.

A cautious mood will prevail in the market as property purchasers expect a reduction in prices while developers either opt to postpone, delay or not launch new projects or new phases.

However, with the reduction in interest rates, mortgage payments would be more affordable, it says.

Malaysian Industrial Development Authority in an overview on industrial projects approved from January to March reports a decrease on the number of new projects approved during the period at 128 compared with 548 new projects approved in the same period last year.

The total capital investment from January to March this year for new approved projects is RM4.34bil compared to RM41.99bil it recorded in the same period last year.

National Property Information Centre in its latest Industrial Property Stock Report Q1 2009 says that in the quarter under review, the number of industrial property overhang remains unchanged at 670 units recorded in the previous quarter but the overhang value increased by 2% from RM342.41mil to RM349.1mil.

On a quarter-on-quarter basis, industrial overhang units decreased slightly by 1.3% from 679 units while their value dropped by 0.7% from RM351.42mil.

These units remained unsold in the market for more than 24 months after their initial launch for sale.

Some 40% (269 units) of the overhang indurtrial units are priced between RM250,000 and RM500,000 a unit, while 25.1% (168 units) of them cost RM250,000 and below.

For industrial units that are under construction and remain unsold, the number increased 3.5% from 656 units in the previous quarter to 679 units. Likewise, it said compared to the corresponding quarter of 2008, the number of unsold units increased substantially by 48.9% from 456 units.

In the quarter under review, the number of unsold units that were not under construction remained unchanged at 711 units recorded in the previous quarter.

On the other hand, the quarter-on-quarter analysis shows that the unsold units in this category increased by 57.6% from 451 units.

“Approximately 56.5% (402 units) of the total number of the unsold and not constructed industrial units have been in the market for more than 24 months after their initial launch for sales,” it says.

From the national total, 45.9% of the units (326 units) were priced between RM250,000 to RM500,000 while 39.9% (284 units) were in the RM250,000 and below bracket, the report points out.

Source: StarBiz

Shipping companies still face uncertainties for rest of year

The possibility of container shipping companies returning to a sustainable business environment in the near term is still uncertain although there are some positive developments regarding term freight rates.

Freight rates, usually determined by demand for goods from Asia to the West, have dropped 50% to 80% since the last quarter of last year due to the global economic crisis.

In an effort to mitigate the fall, large shipping companies have come out with several rate restorations and increases after the first quarter this year.

AmResearch investment analyst Hafriz Hezry said only about 30% of customers actually paid the full amount of the increase in container shipping freight rates announced in April by major companies.

“It’s a good effort by shipping companies, but under the prevailing market condition, importers and exporters can still go for cheaper spot rates,” he told StarBiz, adding that the increase in rates might see more supportive results just before Christmas and the Chinese New Year.

He said the bearish outlook for container shipping was also partly contributed by oversupply of vessels.

Hafriz said only 4% of the total global container fleet was over 25 years that could be scrapped. “And the demand for container shipping is also quite fragmented as it differs from country to country. This is also a factor delaying the recovery of the sector.”

CMA CGM, one of the top three global shipping giants, announced rate restoration on the Asia-Europe trades that would see an increase of US$300 per 20ft equivalent units effective July 1.

Similarly, Singapore-based Neptune Orient Lines has raised its freight rates for its Asia-Europe trade.

AP Moller-Maersk, the world’s largest container shipping company, said the outlook for the rest of the year would be subject to considerable uncertainty, especially due to the development in the global economy.

“Specific uncertainties that are related to the development in container freight rates are transported volumes, the US dollar exchange rate and oil prices,” it said in a recent interim management statement.

Compared with the first quarter, it said crude oil prices for the remainder of the year were assumed to be slightly higher, just as the diminishing decline in freight volumes in the container trade was expected to reduce the fall in freight rates.

“These conditions, combined with an increased effect from cost savings, are expected to improve the group’s earnings in the second half his year.

“A continued loss is expected in the second quarter and it cannot be ruled out that the total result for this year could be negative,” it said.

MISC Bhd, despite the earnings drag from its loss-making container division, would still enjoy positive bottom line as its earnings would be buffered by a stable revenue stream from liquefied natural gas and its offshore and heavy engineering division, which made up almost 100% of the group’s earnings, according to AmResearch in its latest sector update.

The bigger casualties of the fall in container freight rates are Halim Mazmin Bhd, which will be going private later this year, and Nepline Bhd, which posted a net loss of RM2.9mil for its first quarter ended March 31.

On the dry-bulk segment, which has seen a significant improvement to 3,763 points on June 15 from its lowest level last year at 663 points on Dec 5, Hafriz is confident it would be quite stable this year due to the concentration of iron ore exports to China, the world’s biggest iron ore consumer.

“This is due to China’s stimulus package, which focuses on the construction sector that uses a lot of steel,” he said, adding that China consumed about half of the sea-borne iron ore trade last year.

Source: StarBiz

Penang Port slammed over overweight containers

International container shipping lines operating at Penang Port have slammed the terminal operator for not penalising shippers who overload their cargo containers on a vessel, saying it could lead to an accident.

International Ship Owners' Association of Malaysia (ISOA) secretary Fong Keng Lun said requests for enforcement have been sent to Penang Port Sdn Bhd (PPSB) as early as June last year, but so far the calls have gone unheeded.

In a letter dated June 30 2008, obtained by Business Times, the association wrote that some of its members had reported that overweight containers from southern Thailand regularly slipped through the checks at Penang Port and Padang Besar Terminal and were loaded onto the vessels.

"Some of these (overweight) containers were subsequently detected at transshipment ports like Hong Kong and were held back until the shipping lines had repacked the overweight containers.

"Shipping lines have to incur repacking costs and very often, due to time constraint, the on-carrying vessels have to sail off without the containers," ISOA said, also voicing concerns over the risks to human lives and the transportation operators' equipment.

In the same letter, the association had requested for PPSB's support to impose the rule that any overweight containers detected by the terminal operator will not be allowed to be loaded onto the vessels.

"A circular was also sent to all ISOA members on July 2 2008, urging them not to accept overweight containers," Fong told Business Times.

The maximum permissible weight of a 20-foot container is 24 tonnes, 30.48 tonnes for a 40-foot container and up to 32 tonnes for a new generation 40-foot container.

Fong said more recently the association made repeated pleas on May 6 and June 4, which have been ignored by PPSB.

"The letters were issued following news that the problem of overweight containers from South Thailand via Penang had resurfaced. The problem occurred with containers delivered by barge/feeder as well as by rail from Padang Besar," he added.

Fong said ISOA's latest calls for immediate action to stem the overweight container issue at Penang Port was also due to a March 2009 incident at Kantang Port, Thailand, which saw two barges heading for Penang Port sank due to overweight cargo.

"Today, both the Kantang terminal and barge operator are not implementing any enforcement of regulations pertaining to overweight cargo. PPSB likewise is also not implementing any check on this issue," he said.

Fong added that the association was baffled why no action had so far been taken by PPSB on the matter, when Multimodal Freight Sdn Bhd, which manages the Padang Besar Terminal, has responded favourably to similar calls made recently.

"Is PPSB waiting for another accident to happen before it takes any action?" said Fong.

In a letter signed by Multimodal Freight general manager Azman Ahmad Shaharbi, dated May 26 2009, Azman said the company will reject containers found to be overweight and agreed not to load them onto Keretapi Tanah Melayu Bhd's (KTMB) trains for export via Penang Port. Multimodal Freight is a wholly-owned subsidiary of KTMB.

It also pledged to install a weighing bridge for weighing all incoming containers, which is expected to be operational by the end of this year.

Source: Business Times

Shipping agencies take steps to cope with slowdown

Shipping agencies in Port Klang have recorded 30% to 40% drop in volume year-to-date against last year and are implementing strategies to continue doing business under the current weak market.

“As with any other industries, shipping agencies are also affected by the global economic downturn as we are directly impacted by the plunge in demand of goods,” Central Region Shipping Association (CRSA) president Abu Bakar Hussein said.

He was speaking to StarBiz at a CRSA event, An Evening of Fellowship with The Shipping Industry, recently.

Abu Bakar said that to stay afloat in the prevailing market condition, CRSA members had adopted strategies such as reducing costs and increasing productivity, and most had come up with contingency plans to ensure their survival.

“Unfortunately a small percentage of our members had to cease operations,” he said, adding that human resources remained the biggest costs.

Abu Bakar said it was difficult to predict what would happen, going forward. “The same people that predicted the gloom and doom of the industry a few months ago are now giving a positive outlook,’’ he said. “According to some reports, the industry has to remain prudent in the next two to three years.”

But most importantly, he said, the industry had to maintain its efficiency to continue to attract investors and shipping companies to Malaysia.

“Basically, our principals (shipping firms) are looking at efficiency because they also want to reduce costs,” he said.

The CRSA event saw about 18 people from the shipping and related industries being recognised for their contribution to the industry. A special recognition award was given to Selangor Customs director Datuk Roslan Mohd Yusof.

Source: StarBiz

Maersk lifts fees again on Europe-Asia routes

Maersk Line, the world's largest container shipper, said late on Monday it will raise freight rates between Europe and Asia for the second time in two months as current price levels are still unacceptable.

The shipper, a unit of Danish shipping and oil group A P Moller-Maersk, said in a statement it would raise rates on transport routes from the Far East to the Mediterranean and North Europe by US$300 per 20 foot container unit (TEU) on July 1. It will also introduce a peak-season surcharge of US$150 from Aug 1 through Oct 31.

"The trading conditions for the carriers operating in these markets are still subject to unacceptable rate levels and the situation is unsustainable in the longer term," Maersk Line said in a statement.

Maersk Line also lifted rates on routes from India, Pakistan, Bangladesh and Sri Lanka to the Mediterranean and North Europe, and increased them from the Mediterranean back to South Asia and to the Middle East on improved demand.

The shipping industry has seen freight rates and volumes dive in tandem with the global economic downturn. In May, Maersk reported first-quarter freight rates had dropped 24% year-on-year and transport volumes 14%.

In the same month Maersk Line announced higher prices between Europe and Asia, the world's busiest container trade routes, which took effect June 1.

Source: EdgeDaily

Rally in commodity shipping index may not indicate revival in shipping sector

THE current rally in commodity shipping rates reflected in the Baltic Dry Index (BDI) may not indicate any real sustainable revival in the shipping industry as the rise in iron ore shipments and other cargoes to China, a major destination for commodity shipments, is probably due more to current cheaper spot prices than a turnaround in real demand.

The BDI had moved up by 547.2% to 4,291 points on June 3 since its lowest level last year at 663 points on Dec 5.

Iron ore and coal account for about half of commodities shipped on dry-bulk vessels.

Although the current BDI level is somewhat close to industry’s five-year average of 4,921 points, its sustainability for the second half of this year remains uncertain.

An Australian newspaper quoted experts saying that much of the surge in Chinese iron ore imports was driven by traders, rather than steel mills, during an uncertain period over new contract prices for iron ore while domestic demand for steel in China remained weak.

An analyst from a local brokerage told StarBiz that the current iron ore spot price was 63.9% lower year-on-year at US$67.5 per tonne.

“The current spot iron ore price has been moving the BDI and the movement has little to do with the current iron ore price negotiation.

“This is because the spot iron ore price has already reflected the expected outcome of the annual iron ore price negotiations that are still going on due to China seeking a lower price,” he said, adding that Rio Tinto, one of the world’s biggest mining companies, had reached an agreement with Japan as well the rest of Asian steel manufacturers except China.

China was reportedly calling for a fall in iron ore contractual prices to the level seen in 2007 or a drop of at least 40%. It has influential bargaining power because it is the largest customer of Rio Tinto.

According to Reuters fact box on iron ore price negotitions, the world’s top three iron ore suppliers and their major customers gather at the end of each calendar year to determine free-on-board contract prices for deliveries made in the following fiscal year (April 1- March 31), instead of relying on commodity exchanges.

Australia’s BHP Billiton and Rio Tinto together with Brazil’s Vale control around three quarters of the global iron ore export market.

But on a more positive note, AmResearch in its latest sector report said the new dry bulk vessel orders that had almost entirely dried up since the onslaught of the financial crisis would set the right foundation for a strong cyclical upswing.

“Most important, the dry bulk sector is positioned as a proxy to a rebound in commodity prices – which we believe is headed for a recovery.

“Commodities are early cycle plays to a recovery in global economy and the dry bulk sector is a major beneficiary of any pick-up in commodity transportation demand,” it said.

The report also indicated that real demand had been improving as reflected in China’s Manufacturing Purchasing Manager’s Index (PMI) that saw two consecutive months of rebound.

“The PMI rebounded to 52.4% in March, the first time it was back in expansionary zone (i.e. a reading above 50%), since October 2008. The month of April saw further expansion with the PMI registering at 53.5% .

“We think this provides an early indication that downstream steel inventories are being worked down – bearing in mind that steel production has barely recovered in the past couple of months,” AmResearch said.

China’s 4 trillion renminbi stimulus package was also expected to take effect from the second half of this year, it noted.

“The bulk of stimulus plan flows towards construction and transport sectors – big consumers of steel.

“China’s steel demand is driven mainly by the construction sector (51%). This is followed by machinery (14%), auto (5%) and highways (4%).

“We would expect a meaningful recovery in steel demand as a consequence, which in turn, is expected to increase demand for iron ore,” AmResearch said.

Source: Star Biz

Trying times for Asian shipping sector

THE Asian shipping industry remains in a testing economic environment, according to the Asian Shipowners’ Forum (ASF) economics review committee.

Dry bulk shipping is deemed to be moving in a harsh business climate due to delays in the recovery of cargo movements to developed countries and the concentration of new vessel deliveries in the second half of the year.

“But, it is also recognised that the number of new building orders to be cancelled which could reach as many as 1,000 vessels, is now turning to reality and the market will be encouraged by the active scrapping of more than 500 ships since September 2008,” it said in a statement.

On the tanker sector, the ASF said although some 100 single-hull tankers would be withdrawn from the market this year until the end of 2010, it was also anticipated that more than 60 vessels of very large crude carriers would flood the market this year.

“We share the concern that the current tanker market condition showing surplus tonnage would remain for the time being,” it said.

On liner or container shipping, ASF said the effects of the financial tsunami had clearly extended to the trans Pacific and intra-Asia trades.

“The CEOs of Asian container lines companies are urged to handle the situation in a rational and patient manner to ensure the sustainable operation of the liner business in these trades and to keep customers well-informed of the difficult situation faced by carriers,” it said.

The ASF is a voluntary organisation of the shipowner associations of Australia, China, Taiwan, Hong Kong, India, Japan, South Korea and the Federation of Asean Shipowners’ Associations.

Source: StarBiz

MTUC: Locals denied jobs at ports

Thousands of jobs at the ports in Port Klang are taken up by foreigners as some employers have refused to pay reasonable wages for locals.

There were more than 2,500 foreign workers from Myanmar, Nepal, India and Bangladesh employed as lashers, unlashers, stevedoring labourers, surveyors, drivers and general workers, MTUC vice-president A. Balasubramaniam told Bernama.

He claimed the MTUC’s affiliate, The Union of Employees of Port Ancillary Services Suppliers (UNEPASS), had brought this matter to the notice of the Port Klang Authority PKA management several times but to no avail.

Balasubramaniam, also the secretary of UNEPASS, said MTUC’s investigations revealed some errant employers deliberately refused, or made a conscious attempt not to hire locals.

“These employers also deliberately depressed wages and offered very low pay to locals.”

Balasubrmaniam urged the Labour De­­partment to probe this unethical practice so that locals could replace foreigners, in line with the Government’s policy of making sure locals were provided with jobs first.

Source: StarBiz

Scomi Marine aims to sell more old vessels

Scomi Marine Bhd aims to sell at least 10 of its offshore utility vessels that are over 20 years old in the next two to three years.

Chairman Tan Sri Nik Mohamed Nik Yaacob said the company had in the last year sold four vessels that were over 20 years old for US$3.2mil.

“We are looking to sell off these old vessels progressively,” he told a press conference after the company’s AGM yesterday.

Scomi Marine via its 29.07% Singapore-based associate, CH Offshore Ltd, is currently in negotiation for the acquisition of two anchor-handling tug and supply (AHTS) vessels, to be delivered separately this year and next.

With a cash balance of about RM150mil, the company is in a strong position to take advantage of the lower vessel prices amid the economic slowdown.

As of last year, the company’s gearing was below 0.6 times thanks to the consolidation that took place last year.

“We are also expecting to close some deals to charter out our new accommodation barge within this month,” said president Mukhnizam Mahmud, without disclosing the targeted chartered rates for the barge.

Due to be delivered this week, the accommodation barge has the capacity to shelter 180 people for its offshore support services.

Mukhnizam said there would still be demand for vessels, mainly in the Asian region, as national oil corporations and international companies have their own agenda to meet.

“We need to appreciate the macro level where major oil companies would still need to produce oil. We just need to be mindful of the services we offer,” he said.

On its marine logistics for the coal industry, Mukhnizam said demand for coal should pick up, especially in the emerging markets, as it is a viable alternative for power producers who need to diversify their generating base.

Scomi Marine has transported about 900,000 tonnes of coal to power utility companies in the last year and expects to carry in excess of one million tonnes in 2009.

Scomi Marine, a 43% associate company of Scomi Group Bhd, is optimistic that demand for marine logistics and offshore support services will continue to be resilient amid the current economic slowdown.

Scomi Marine’s net profit rose 19.6% to RM64.9mil for financial year ended Dec 31, 08 while revenue increased to RM467.1mil from RM462.1mil.

The higher net profit was mainly due to savings in general and administrative expenses and a higher contribution from an associate company following the deliveries of four new AHTS in the first quarter of last year.

Source: StarBiz

MISC liner division will exit Asia-Europe trade

MISC Bhd’s withdrawal from Grand Alliance, the world’s largest container shipping alliance, will result in a pullout of its liner division from the loss-making Asia-Europe trade route which is suffering from plunging freight rates.

MISC has been a member of the alliance since 1998.

Besides MISC, three other members of the Grand Alliance are Hapag-Lloyd, Nippon Yussen Kaisha and Orient Overseas Container Line Ltd, which collaborate to provide shipping services in the European, Mediterranean, trans-Atlantic and trans-Pacific trade lanes.

The move will take effect from Jan 1, 2010 resulting in a withdrawal of MISC’s participation from the European and Mediterranean trade lanes.

The Grand Alliance fleet comprises about 140 vessels with capacities of between 2,900 and 9,000 twenty-foot equivalent units (TEUs) each.

One of MISC's container vessels, Bunga Teratai.

Seven of the vessels are provided by MISC.

The strategic alliances among liner shipping companies, which started in 1994, saw the rationalisation of operations such as joint fleet, slot exchange, slot charter, slot purchase and share of port usage.

“The present global economic downturn has severely impacted the global liner industry with many leading operators having to react radically to manage the downturn,’’ the company said in a filing with Bursa on May 15.

“The withdrawal of MISC’s liner division from the Asia-Europe trade is part of a portfolio restructuring to reposition the business on a firmer footing that will drive future expansion.

“As a result, our liner division’s future focus will be to become one of the leading intra-Asia liner operator, with the Middle-East/India Subcontinent to Asia trade being one of its core trade services.”

An analyst at a local brokerage told StarBiz that MISC’s involvement in the Asia-Europe trade lane via its commitment in the Grand Alliance was the reason for its liner division to post losses.

“By next year, its focus will shift towards the intra-Asia trade lanes which have more resilient freight rates.

“Intra-Asia is more resilient because it leans towards the transportation of foodstuff that is less affected by the global economic downturn,” he said.

Usually, the Asia-Europe trade lane involves the transport of finished goods.

He added that the move was also in line with MISC’s halal shipping and logistics businesses.

“The halal trade routes include South-East Asia to Middle East and China,” he said.

In a recent company update, OSK Research said MISC’s liner division aimed to become one of the leading intra-Asia liner operators, with the Middle-East/India subcontinent to Asia trade being one of its core trade services due to the restructuring.

“MISC has allocated six vessels of 4,250 TEUs to develop its Halal Express Service, and we expect this niche service to offer huge earnings potential in longer term,” it said.

The report said the company’s liner operations’ operating loss, which ballooned to RM990.5mil in the financial year ended March 31, 2009, was expected to return to the black in the next financial year.

“This is because other than reshaping its liner’s business model, cost- saving measures such as a reduction in feeder rates, terminal rates and bunker consumption are the company’s top priorities.

“MISC has also made an aggressive 45% capacity cut by ‘warm layoff’ of its 11 container ships.

“We understand that this may save 75% of the vessels’ operating cost,” it said, adding that MISC also intended to return all of its 15 in-charter container ships upon maturity.

Source: StarBiz

Container vessel chartering mart likely to recover by year-end

Container vessel chartering rates have probably hit bottom and the container ship chartering market is likely to pick up at the end of 2009, said the head of Maersk Broker, one of the world's largest shipbrokers.

The global freight market has been hit hard by slowing trade due to the economic downturn, and container shippers have reported sharp decreases in freight volumes and rates.

"In our opinion the container vessel chartering rates have generally reached the bottom. They could remain there for a while, but it won't get much worse than now," Maersk Broker chief executive officer Jorn Nielsen said last week.

A chartering rate is the cost of hiring a vessel.

The privately-owned Danish firm's core business includes chartering of container vessels, tankers and bulk carriers, contracting new vessels and sale and purchase of ships.

The broker's owner is also the biggest shareholder of world No.1 container shipper A.P. Moller-Maersk.

Nielsen said in an interview he saw the container chartering market stabilising in 2010. "Our estimate is that, when you get a little further ahead, maybe at the end of 2009, it's beginning to look slightly brighter." "We base that on our view of the world economy," he said.

"When we put our ear to the ground, we actually see reason to hope that this crisis is about to settle."

After years of booming business, the shipping industry is struggling with overcapacity as ships ordered years ago have become ready for delivery in the midst of the economic downturn.

The number of new ships on order at shipyards equals more than 50 per cent of the current world fleet, Nielsen said.

The influx onto the market of new ships currently on order will continue to negatively affect freight and charter rates in coming years, he said.

Many new container ships will not be taken into service immediately as there is no need for them.

"For container vessels, we will continue for a while to see newbuildings proceed straight into lay-up until the container market shows significant improvements," Nielsen said.

"You have currently more than 500 container ships idle, and it doesn't look any better if you analyse the order books for the coming one to three years," he said.

Nielsen said owners providing tonnage to the container line operators were currently trading at charter rates which for new deals were merely covering daily operating costs, or even less.

"The new ships will over time be absorbed into the market. I just can't tell you when it is realistic to expect a more balanced scenario." But Nielsen said he saw few cancellations of orders for container ships, whereas delivery for many new ships had been postponed.

Source: BusinessTimes