CMA CGM's first On Dock Depot in Asia opens at Westports

CMA CGM's first dedicated On Dock Depot (ODD) in Asia officially opened recently at Westports in Port Klang.

The ODD facility, located at CT5, is aimed at providing good customer service to the French liner's customers, especially in the local market which has grown tremendously this year.

Witnessing the milestone event were Westports Malaysia Sdn Bhd executive chairman Tan Sri G. Gnanalingam, executive director Ruben Emir Gnanalingam and CMA CGM ANL Malaysia managing director Simon Whitelaw as well as representatives from the local CMA CGM office and Westports.

Speaking at the opening, Whitelaw said plans for the ODD facility were looked into for sometime as a means to support its growing domestic business.

He said the ODD would provide fast turnaround of empties, quick delivery and better quality boxes.

"The ODD facility would provide another strategic base for our customers at Westports to help meet the growing demand generated by ever increasing levels of trade. Besides providing cleaning and repairs of empties, we also provide free inspection," he added.

He also pointed out that the ODD, which has access to the Free Zone and with a current capacity of 12,000 TEUs (20-foot equivalent units), has the potential to become a regional hub.

CMA CGM, the world's third largest shipping line, is Westports' number one customer.

Source: Business Times

Steady rise in sea and airfreight in Penang

The sea and airfreight business in Penang improved in the second quarter by about 12% and 20% respectively from the first quarter.

For the second quarter, sea throughput rose to 163,985 twenty-feet equivalent units (TEUs) from 145,854 TEUs in the first quarter, while air cargo increased to 24,196 tonnes from 19,910.

Penang Freight Forwarders Association (PFFA) president Krishnan Chelliah told StarBiz that the second-quarter results showed the import and export of goods in Penang were gradually improving.

“The last six months have shown a steady increase month-on-month.

“However, compared with the second quarter of 2008, the airfreight business is down by about 33%.

“The sea-cargo business in the second quarter is down about 19% compared with the corresponding period of 2008,” he said.

Krishnan Chelliah says the second-quarter results show the import and export of goods in Penang were gradually improving. ‘The last six months have shown a steady increase month-on-month.’

Krishnan said the air and sea-freight volumes in July were the highest this year.

“This shows that we are recovering and bottoming out. In January 2009, the airfreight volume was the lowest in many years, and from February onwards there was a steady increase of 2% to 3% every month.

“In July, there was a jump of 4%. However, in the sea-freight business the month-on-month increase was 10% to 15%,” he said.

Krishnan said PFFA expected the growth to continue in the second half of this year.

PFFA secretary-general Bryan Kor Hock Choon said the third quarter should see the sea and airfreight business in Penang improve by about 10% over the second quarter, and the fourth quarter by 5% over the third quarter.

“Generally, in December, business slows down for freight forwarders,” he said.

Krishnan also urged the State and Federal Governments to continue attracting foreign direct investments to maintain the momentum of growth and recovery.

»Exporters are doing less business because the number of regional buyers in Asia had dropped« DATUK TAN CHOO HIN

Meanwhile, Penang Importers & Exporters Association (PIEA) president Datuk Tan Choo Hin said that for the first six months this year, PIEA members imported about 33,000 TEUs of cargo against about 46,000 TEUs in the previous corresponding period.

“The exporters also exported less in the first six months, shipping about 45,000 TEUs compared with about 70,000 TEUs in the previous corresponding period,” Tan said.

He said imports by PIEA members were lower in the first half because February, March and April were generally slow months, the festive season was already over, and the local demand had weakened.

“The peak season starts from May and lasts till the fourth quarter,” he said.

“Exporters are also doing less business because the number of regional buyers in Asia had dropped.

“At the recent China Import and Export Fair in Guangzhou, the number of purchasers from South-East Asia dropped by about 30%. We see, instead, more buyers from India and the Middle East,” he said.

Tan said the third and fourth quarters should see an improvement but overall, business this year would not be better than in 2008.

He added that there was “no visibility” as to the business environment for 2010.

Source: StarBiz

M'sian shipping, aviation recovery may take 2 years

MIMB Investment Bank expects the second half of this year to be tough for the Malaysian shipping industry, mainly due to worldwide excess vessel capacity, which would continue into 2010.

"Although the phasing out of single hull vessel ruling will only come into force in 2010, we think that the imbalance in supply and demand will take time to correct itself," its analyst Rosnani Rasul wrote in a report dated June 29.

The phasing out of single hull vessels under the International Maritime Organisation (IMO) regulations will see some 35 per cent of global vessels cease operations in major trading routes.

Rosnani said that with the exception to dry bulk shipping, the situation in other shipping segments, including tankers and chemical, have not improved in the first half of this year (1Q09).

"In fact, most shipping players in the world, including local firms, have recorded significantly lower 1Q09 earnings, no thanks to weak demand which was exacerbated by excess capacity," she added.

During the booming year in 2007, most shipping companies rushed to add new buildings, which resulted in significant number of new ships entering the global market.

As a result, the number of order book as a percentage of dead weight tonnes reached a staggering 60 per cent for some, like chemical. This has weakened shipping rates to a record low and made some companies operate at below their operating cost, said Rosnani.

As for the airline industry, she said some airlines are still trapped in expensive jet fuel cost hedging, no thanks to the spike in crude oil price last year.

Some still have to purchase their crude oil at US$100 (RM357) per barrel compared with the average of US$43 (RM153.51) per barrel in 1Q09.

"With the ongoing threat of the influenza A (H1N1) flu, coupled with expensive fuel hedge value, the airlines industry may face a tough time ahead.

"This will be exacerbated by the prolonged weak demand following the slow recovery in global credit crisis," said Rosnani.

She foresees some improvement on the card only in the second half of 2010 when stabilisation in crude oil price will play an important role.

"Most countries in the world are likely to record positive gross domestic product growth by then, and hence, will be a precursor to the recovery in air travel," she added.

In view of the gloomy economic outlook, MIMB Investment Bank has reiterated its "underweight" call on the transportation sector, and predicts that the recovery period for the shipping and aviation sectors may take up to two years.

Source: Business Times

Types of containers

20' General Purpose Overall dimensions (m) 6.1 x 2.4 x 2.6 Interior Dimensions 5.89 x 2.345 x 2.4 Door Dimensions/Side Openings 2.335 x 2.29 Capacity 32.7 Tare Weight 2450 Gross Weight 24000

20' Folding Flatrack Overall dimensions (m) 6.1 X 2.4 X 2.6 Interior Dimensions 5.49 X 2.4 X 2.31 Side Openings L x H (m) 5.576 X 2.31 Capacity 31.9 Tare Weight 2610 - 2810 Gross Weight 30480

20' Highcube

20' Half Height Overall dimensions (m) 6.1m x 2.4m x 1.3m Interior Dimensions 5.6m x 2.3m x 1.0m Capacity 30.4T Tare Weight 2.4T Payload (kg) 2,800kg

20' Integral Reefer Overall dimensions (m) 6.1 x 2.4 x 2.6 Interior Dimensions 5.45 x 2.26 x 2.247 Door Dimensions/Side Openings 2.26 x 2.247 Capacity 27.7 Tare Weight 3460 Gross Weight 24000

20' Opentop Overall dimensions (m) 6.1 X 2.4 X 2.6 Interior Dimensions 5.89 X 2.345 X 2.34 Door Dimensions/Side Openings 2.335 X 2.26 Capacity 32.4 Tare Weight 2093 - 2513 Gross Weight 2400 - 30480 Roof Aperture L x B (m) 5.712 X 2.175

20' Tanktainer Overall dimensions (m) 6.1 X 2.4 X 2.6 Tare Weight 3949 - 4650 Gross Weight 30480 Total Water Capacity (litres) 24000

40' General Purpose Overall dimensions (m) 12.19 x 2.43 x 2.59 Interior Dimensions 12.03 x 2.35 x 2.39 Door Dimensions (m) 2.38 x 2.29 Capacity 66.3 Tare Weight 3,700 Gross Weight 32,500 Payload (kg) 28,780

40' Flatrack Overall dimensions (m) 12.2 X 2.4 X 2.6 Interior Dimensions 12.066 X 2.263 X 2.134 Side Openings L x H (m) 11.62 X 2.134 Capacity 58.6 Tare Weight 5960 - 6100 Gross Weight 40640

40' Highcube Overall dimensions (m) 12.19 X 2.44 X 2.895 Interior Dimensions 12.03 X 2.35 X 2.69 Door Dimensions (m) 2.34 X 2.59 Capacity 79 cbm Tare Weight 4300 Payload (kg) 28,600

40' Opentop Overall dimensions (m) 12.2 X 2.4 X 2.6 Interior Dimensions 12.025 X 2.247 X 2.305 Door Dimensions (m) 2.235 X 2.2 Capacity 63.47 Tare Weight 3949 - 4650 Gross Weight 30480 Roof Aperture L x B (m) 11.832 X 2.150

Maersk Rises as Chief Says World Trade Is Improving

A.P. Moeller-Maersk A/S, owner of the world’s largest container line, rose as much as 7 percent in Copenhagen as its chief executive officer said world trade is improving and some container rate increases are “sticking.”

The Copenhagen-based company posted a net loss of 3.67 billion kroner ($700 million) in the first half, compared with net income of 11.6 billion kroner a year earlier, it said today in a statement. That was in line with the 3.7 billion-krone median estimated loss of a Bloomberg survey of five analysts. Sales fell 14 percent to 127.4 billion kroner.

“We’ve been through a crisis of historic dimensions,” Chief Executive Officer Nils Smedegaard Andersen said in a telephone interview. “But we’ve improved our underlying business by $1.5 billion through reduced costs and better use of assets, which will strengthen us after the crisis.”

The container market will decline more than 10 percent this year as consumers rein in spending during the recession, the first year of contraction since the 1970 birth of containerization, according to a June forecast by London-based Drewry Shipping Consultants Ltd. Maersk said today that volumes dropped 7 percent in the first six months of the year.

Still, Andersen said, the world economy has seen the bottom and “trade is definitely picking up.” The company has been raising some shipping rates, he said.

Shares Rise

Maersk rose as much as 2,300 kroner to 35,300 kroner in Copenhagen trading, the biggest intraday jump since June 10 and was up 6.1 percent as of 3:31 p.m.

Rate increases and the improved world trade “were not at all reflected in the share price before,” said Jacob Pedersen, an analyst at Sydbank A/S, who has an “overweight” recommendation on Maersk shares. “It’s the first step to get to a point where the container business is profitable again.”

Second-half results “are expected to be at the same level as the first half year,” Maersk said in the statement. That means the company, Denmark’s largest, may post its first full- year loss in at least six decades.

Maersk Line, which operates 470 vessels and owns 1.9 million containers, lost $958 million in the first half compared with a profit of $268 million a year earlier.

Overall rates fell 30 percent in the period, the company said, adding that it expected “modest” rate increases starting in the third quarter. Maersk said the container division maintained its 15 percent market share.

Rate Increases

CEO Andersen said it’s hard to predict when Maersk Line would be profitable again. The shipping line has been announcing rate increases on various routes since the beginning of the year.

“The rate increases we’ve given out are sticking,” Andersen said. “Rates bottomed out later and deeper than we expected, with the lowest levels in May-June. Since then they’ve increased gradually. They are not enough to make the industry profitable, but these are steps in the right direction.”

Maersk’s oil and gas business, the biggest profit contributor in the past three years, recorded a 57 percent drop in first-half net income to 2.8 billion kroner.

The company’s tankers unit had a first-half loss of $155 million from a $194 million profit a year earlier.

“Oil prices are fine but production is limited by OPEC quotas,” Andersen said. “There is less oil to transport and therefore tanker rates are at a record low.”

Source: Bloomberg

Hapag Decision Due Next Month as German Maritime Industry Reels

German Chancellor Angela Merkel’s government will decide by the end of next month whether to grant shipping line Hapag-Lloyd AG a state guarantee, Deputy Economy Minister Dagmar Woehrl said.

“The application is in and will be examined,” Woehrl told reporters in Berlin today. “A decision is to be expected in the middle or at the end of September.”

German maritime companies including Hamburg-based Hapag, ThyssenKrupp Marine Systems and Wadan Yards MTW GmbH are suffering as collapsing world trade crimps demand for vessels and shipping. The government has said it’s ready to help companies provided they had a working business model before the financial crisis started.

Germany’s maritime industry is “in dire straits,” Woehrl said. “Even while there are signs of an improvement, we’re not in safe waters yet.”

Since the start of last year, orders for 54 ships have been canceled or aren’t being built due to insolvencies, Woehrl said. Not a single new container ship has been ordered since the collapse of Lehman Brothers Holdings Inc. in September 2008, she said.

The global container market will decline more than 10 percent this year as the recession prompts consumers to rein in spending, according to a June forecast by London-based Drewry Shipping Consultants Ltd. Germany, as the world’s biggest exporter, is feeling the fallout as foreign sales slump during the first year of contraction since the 1970 birth of containerization.

Export Trade Declines

German trade will decline by 17 percent this year, possibly costing the country the title of export world champion, Woehrl said, citing DIHK industry and commerce chamber figures. Freight volumes, while expected to double by 2025, will drop in the short term as a consequence of the economic crisis, she said.

Hapag’s sales declined 24 percent in the first half and the loss before interest, tax and appreciation was 435 million euros ($622 million), compared with profit of 133 million euros a year earlier.

State-owned HSH Nordbank AG, leader of a group of lenders to cash-strapped Hapag, filed a bid for state aid on Aug. 13. TUI AG, the shipping line’s biggest shareholder, said Hapag’s government loan guarantees are worth 1.2 billion euros while the owners will give 750 million euros.

A German agreement to guarantee Hapag’s loans would echo moves in Asia, where South Korea committed 1 trillion won ($743 million) to buying ships to support local companies. Exports from China, the world’s fastest growing economy, collapsed a record 23 percent last month, according to customs data.

Maersk Results

The global recession has also cut demand for the services of Hapag rivals including A.P. Moeller-Maersk A/S, the world’s largest container-vessel owner, and Neptune Orient Lines Ltd., Southeast Asia’s biggest. Copenhagen-based Maersk posted a first-half loss today as lower global consumption hurt freight volumes and cargo rates.

Woehrl said banks’ refusal to lend to yards and shipping companies remains a problem even after the government agreed to cover 90 percent of the lending risk from loans originated at state-owned development bank KfW Group.

The Economy Ministry, by assuming the role of an honest broker between banks and companies for the first time, is doing what it can to spur lending, she said.

“There are a few things we absolutely don’t understand,” Woehrl said. “We’ve done everything we can to help banks. And not only us, also the European Central Bank, which has lent 400 billion euros to 1,100 banks at 1 percent interest for a year.”

Woehrl also said the government has taken no decision yet on extending a 190 million-euro preferred loan to Wadan Yards because no final agreement has been reached over Stena Line AB taking over two ships already built by Wadan. The government already provided a 180 million-euro loan to Wadan in January.

Insolvent Wadan’s board of creditors on Aug. 17 agreed to the shipyard’s sale to Russian investor Igor Yusufov, who pledged to retain up to 1,600 of the current 2,500 employees. The sale was backed by Merkel and President Dmitry Medvedev.

Source: Bloomberg

Maersk suffers first-half loss

Danish shipping and oil group A.P. Moller-Maersk pointed to signs of market recovery in freight traffic yesterday after posting a record first-half loss and predicting similar in the second half.

Losses piled up as the plunge in world trade hit freight rates and volumes at the world's biggest container shipping line and oil prices fell.

Maersk, a barometer for the health of global trade, said yesterday that it had swung to a net loss of 3.02 billion Danish crowns (100 crowns = RM70.30) from a profit of 11.98 billion a year earlier, missing analysts' average estimate for a loss of 2.91 billion in a Reuters poll.

However, chief executive Nils Smedegaard Andersen said he saw some signs of improvement, with shipping volumes and rates starting to rise. He said that the shipping cycle would lag global economic recovery as expansion of the world fleet kept a lid on rates.

"The global economy is moving into a better situation - we are expecting growth going forward and the worst to be behind us," Andersen said in a conference call.

"Given deliveries (of vessels) in container shipping and tankers, it is likely that the shipping cycle will be somewhat slower in improving, but we are optimistic that the things that we are doing for the long term are right," Andersen said.

Maersk, a conglomerate whose businesses range from shipping to retail and a more than 20 per cent stake in Danske Bank, said it expected similar weighty losses in the second half.

The global economic crisis had a "severe negative impact" on the group's activities in the first half, said Maersk, whose container shipping fleet consisted of 501 vessels at the end of the first half.

Container freight rates were 30 per cent lower and volumes 7 per cent lower than in the first half of 2008, Maersk said.

"The trend is now expected to reverse, with rate increases, albeit modest, in the third quarter of 2009," the company said.

Maersk operates the world's largest container shipping fleet, Maersk Line, and controls about 85 percent of Danish oil production in the North Sea, together with partners Shell and Chevron.

Andersen said the group's offshore activities - oil drilling and supply ships - performed well.

Revenues fell to 127.39 billion crowns in the first half from 148.37 billion in the same period last year, in line with analysts' average forecast of 127.33 billion.

Source: Business Times

MISC expects costs to soar on bunker rates

Volatile freight rates also affecting the shipping industry

KUALA LUMPUR: MISC Bhd, the world’s single-largest owner-operator of liquefied natural gas carriers, sees escalating operating costs due to the sharp rise in the prices of ship fuel.

Chairman Tan Sri Mohd Hassan Marican said bunker prices accounted for a large portion of its operating cost.

“It was US$700 a tonne in the middle of last year, (it then) eased to US$200 per tonne and now it is almost US$400 a tonne,” he said after MISC’s AGM here yesterday.

Besides rising bunker price, the shipping industry is also plagued by volatile freight rates due to the contraction in the global trade apparent in Asia-Europe trade.

But MISC had been cushioned from the impact of fluctuating freight rates due to the nature of its business, where 70% were under long-term contracts, Hassan said.

Nevertheless, its liner division was not spared the gloomy shipping environment and slipped into the red in its previous financial year ended March 31.

Now, the division is under a rationalisation programme to turn it around.

“We are going to transform this business from being a small player in the Asia-Europe trade to become a dominant player in the intra-Asia and the growing halal trades,” he said.

MISC will also completely withdraw from the Grand Alliance shipping alliance by next January due to exposure to the fluctuating Asia-Europe trade freight rates.

“The laying off of 11 container vessels is also part of the programme as it cost less for us to idle the ships rather than operating them in the current environment,” he added.

Going forward, Hassan said MISC would continue to grow organically but would consider mergers and acquisitions.

Its latest projects include a 50:50 joint venture with VTTI Tanjung Bin S.A. to construct, commission and operate an oil terminal with a capacity of 741,200 cu m in Tanjung Bin, Johor, via wholly-owned subsidiary MISC International (L) Ltd.

Other developments include talks with China LNG Shipping (Holdings) Co to form a joint venture to build and supply a liquefied natural gas (LNG) vessel to transport LNG from Bintulu to Shanghai.

In a filing with Bursa Malaysia yesterday, MISC reported a 55.4% fall in net profit to RM233.4mil in the first quarter ended June 30 against the corresponding quarter last year.

Its revenue, however, increased by 6.6% to RM3.9bil.

Source: StarBiz

Piracy drop in the Straits of Malcca

Heightened maritime security along the Straits of Malacca has seen a drop in piracy over the last two years.

Malaysian Maritime Enforcement Agency director-general Datuk Mohd Amdan Kurish said only one case was reported so far this year compared to three and 12 cases recorded last year and in 2007 respectively.

Mohd Amdan attributed the drop to the improved security in the straits by way of increased patrols and surveillance by the multinational maritime force under the Malacca Straits Sea Patrol.

“We plan to establish closer cooperation by focusing on security zones that are under surveillance within our respective waters,” he told reporters after officiating the inaugural International Seminar on Legal Aspects of Border Security in a Maritime Environment here yesterday.

He also said Malaysia, Indonesia and the Philippines were set to expand cooperation to coordinate sea and aerial surveillance.

The cooperation between the maritime enforcement agencies of the three countries would include exchange of information and joint efforts to deal with transnational crimes and other maritime threats.

“Such an approach is vital as the maritime boundaries cover a large area that include exclusive economic zones, fishing zones and air space,” he said.

Some 20 senior maritime officers from the three countries are attending the seminar with the United States participating as a moderator in the proceedings.

The three-day seminar is jointly organised by the Malaysian Maritime Enforcement Agency and Kuala Lumpur-based Defence Institute of International Legal Studies.

Source: The Star

KL under pressure again over cabotage policy

Manufacturers, traders and shippers in Sabah are bringing renewed pressure to bear on the federal government to further liberalise the National Cabotage Policy (NCP).

The policy keeps out foreign vessels from the movement of goods between Port Klang, the designated national load centre, and ports in Malaysian Borneo.

Federation of Sabah Manufacturers (FSM) president Wong Khen Thau warned that the federal government must complete the liberalisation of the policy without any further delay and not continue to indulge in cosmetics.

"The opening up of the policy is an issue that Sabah has been pursuing all this while," stressed Wong on the sidelines of the weekend opening of Wisma FSM at the Kota Kinabalu Industrial Park (KKIP) in Sepanggar Bay.

"If the policy is further opened up, then I think it (liberalisation) will be complete," he added.

Wong was commenting on the renewed public debate on the pros and cons of the NCP but he has so far refused to get into the polemics.

The Transport Ministry, not so long ago, announced some "piece-meal measures" aimed at easing the policy and deflecting increasing public criticism of the federal government over the higher cost of living in Sabah and Sarawak compared with Peninsular Malaysia.

The NCP is being blamed for the price difference in consumer perishables, among others. At the same time, salaries in Malaysian Borneo are very much lower than that in Peninsular Malaysia.

If the NCP has heated up again in recent days as a political hot potato, it is with good reasons too. One result of the policy is that job-seekers shun the numerous jobs available locally and still make for greener pastures in Brunei, Peninsular Malaysia and Singapore.

Association says no to liberalisation

Executive secretary of the Malaysian Shippers Association (Masa), Imtiaz Hussein, poured fuel on the fire in recent days when he launched a pre-emptive strike against further liberalisation by issuing a media statement on the issue.

Basically, it was a feeble attempt to deny that Masa members are behind the comparatively higher cost of living in Malaysian Borneo.

Briefly, he claimed that members of Masa are charging reasonable prices; the prices imposed by Masa are not the only cause - there are other parties that are causing the higher cost of goods in Sabah and Sarawak.

"It is important to point out the flawed arguments of shippers who blame high shipping costs and want the federal government to relax the National Cabotage Policy," said Imtiaz, who vowed that Masa would strongly oppose any further liberalisation of the NCP.

Masa's aggressive defence of the NCP in Sabah and Sarawak has sent the hackles up among people from all walks of life in Sabah and Sarawak and caused them to see red on the issue.

Trading community spokesperson John Lo, among those vociferous on the issue, begs to differ with Masa and has been picking at what he sees as the flaws in the association's arguments.

He points out that Masa has not mentioned collusion practices by its members on price-fixing; whether there is free and fair competition among its members for the South China Sea routes between Peninsular Malaysia and Sabah/Sarawak; and that Masa has not revealed facts and figures which the public can use to benchmark their prices vis-à-vis other similar routes.

"In this logistics supply chain, ocean freight charges (paid to the shipping line) for imports into Kota Kinabalu, for example, from Port Klang constitute about 40 percent, it is claimed," said Lo.

"In any business environment where cost reduction is a constant worry, a cost component of 40 percent is already a very significant item and should be examined in the minutest details."

Lo added that it was not for Masa to decide whether other components in the cost scenario were high or low.

Cartel overrules people's need

Shipping industry watcher Loong Chai, who has examined the cost structure closely, points out that except for freight charges which are determined by the ship owners, all other cost components are controlled by the government.

"The port charges, for example, in Sabah have not changed since it was introduced in the 1970s. So, how is it that port charges takes a major portion of the cost?" asked Loong.

"The forwarders fees as well as for haulage is less than RM500 per container. So, how can this portion be the cause of the higher logistics cost?" he asked.

Their places continue to be taken by illegal immigrants flooding in from the Philippines, Indonesia, Timor Leste, Pakistan and Bangladesh, among others.

Whether Masa accepts or otherwise, it cannot be denied that their cost per 20 foot container is not less than RM2,000 and this cannot be only 40 per cent of the total cost, continued Loong.

Loong is well armed with other figures on the carrying capacity of ships on the South China Sea run, their cruising time between ports in Malaysian Borneo and their fuel usage.

He thinks such figures serves little purpose whatsoever in the debate over the NCP.

"After 30 years of making appeal after appeal, it is obvious that the needs of the shipping cartel are much stronger than that of the people of Sabah and Sarawak," said Loong.

"There is no point arguing with the ship owners because the NCP gives them complete monopoly in domestic shipping. There is no point in appealing to the government as well because it will make endless studies with no clear solution."

The NCP has caused a lot of people in Sabah and Sarawak much frustration and numerous lost opportunities in business and trade, added Loong.

Having injected a note of pessimism and hopelessness into the debate, Loong thinks that "not all is lost".

He refers to a little known debate taking place in local circles on restructuring Sabah's trade pattern away from Peninsular Malaysia to beat Masa at its own game.

The 'Muara School of Thought'

Statistics tell the story. Sabah, for example imports 58 percent of its requirements from Peninsular Malaysia while sending only 13.2 percent of its exports there and 17 percent, for example, to China.

The suggestion being seriously considered is that Sabah import more goods from China, Hong Kong and Taiwan via the international container port of call in Muara, Brunei.

Muara, the only port in Borneo that is not affected by the NCP, is just a hop, step and jump away from Menumbuk, Labuan, Kota Kinabalu and other places along the west coast of Sabah.

The 'Muara School of Thought' is expected to take off, as Bruneiseeks to diversify its economy, even as the pressure continues for the lifting of the NCP.

Lo is among those who concede that the total cost scenario should be looked at once again "to expose the flaws in the Masa arguments and the findings made public".

Source: Malaysiakini

FMFF: Review 51% Bumi equity and Regulate freight forwarders

The Federation of Malaysia Freight Forwarders wants the registration of freight forwarders be made mandatory to weed out fly-by-night operators

THE Federation of Malaysia Freight Forwarders (FMFF) has proposed that the Transport Ministry control the number of players in the market and make the registration of freight forwarders mandatory in order to weed out fly-by-night operators.

Selangor Freight Forwarders & Logistics Association (SFFLA) vice-president Chan Kong Yew said the freight forwarding industry is currently not regulated by any government body.

"The government should recognise the linkage between regulation, accreditation regimes, industry performances and quality standards," he told Business Times in an interview.

"On our part, FMFF is developing a framework where local freight forwarders can be regulated and benchmarked against international standards in terms of paid-up capital, operational capability, financial strength, ethical conduct, professional capacity and experience," he added.

FMFF also plans to upgrade the professionalism of the logistics industry through education and training.

"We recognise the importance of training and upgrading the skills of our members and employees, and have divided them into three focus groups," said FMFF president Alvin Chua Seng Wah.

Chua is also the newly-appointed president of SFFLA, following the demise of former president Abel Tan Ah Beng last month.

"The first group will comprise operational staff, who will undergo practical and vocational training, while the second group will focus on enhancing the knowledge of clerical and supervisory employees through a series of short courses.

"The third group will encompass executive staff, who can participate in the federation's foundation and certificate courses," he said.

In this regard, FMFF is working closely with the United Nations Economic and Social Commission for Asia and the Pacific and the International Federation of Freight Forwarders Associations (Fiata) in developing a series of logistics courses from foundation level to certificate, and eventually leading to a diploma in accordance with Fiata's syllabus, which is recognised by the world logistics industry.

"We are planning to introduce the diploma programme in Multimodal Transport Operation by the end of this year," Chua said, adding that FMFF is in discussions with Universiti Tunku Abdul Rahman to enter into a collaboration to offer the diploma course.

In another development, FMFF wants the government to lower the Bumiputera equity requirement for locally-registered licensed Customs brokers to 30 per cent from the current 51 per cent, to help them compete on a level playing field against their foreign counterparts.

"In 1976, the Customs Authority had imposed a requirement of 51 per cent Bumiputera equity share for all new and renew Customs brokerage licence. As a result, there is now a big percentage of Bumiputera portion that are normally decorative rather than actual contribution," said SFFLA deputy president Yeoh Kean Jin.

It is understood that the current 51 per cent Bumiputera equity requirement has prevented many non-Bumiputera Customs brokers from reinvesting their profits into growing their company over concerns that they do not have control over the company's operations.

To reduce their risk, the non-Bumiputera Customs brokers have spread their investments among many different companies.

"As the Customs brokers start to expand and diversify their businesses to offer integrated logistics services like warehousing and distribution, transportation, and value added services, they would normally form new companies and have different partners," said Yeoh.

This has resulted in many of them not being eligible for the Malaysian Industrial Development Authority (Mida) incentive for integrated logistics services (ILS), which requires the company or the group of companies to have the same shareholding structure.

"This problem is reflected in the number of local freight forwarders who have qualified for the ILS incentive. Of the 12,000-odd freight forwarders in the country, only 21 have qualified so far.

"As such, we call on the government to liberalise the Bumiputera equity requirement in the Customs brokerage business so that we can consolidate all our companies into one integrated logistics service provider and compete with the likes of Nippon Express, Geologistics and BAX Global," said Yeoh.

"This is also in line with the full liberalisation of freight services in Asean by 2010," he added.

Source: Business Times

Container Forecaster predicts 10.3% contraction this year

Drewry Shipping Consultants’ latest Container Forecaster analysis has predicted a 10.3% contraction in the global container industry this year, to be followed by a mere 1% growth next year. For one of the most competitive trade routes – Asia-Europe, three years of demand growth have been wiped out, according to the report.

Drewry predicts that global container handling this year would be 27 million 20-foot equivalent unit, less than in 2007. This in itself is also bad news for the port investment sector.

The Drewry global/supply demand index, one of the industry’s key measures, is set at 83.4 for this year, falling to 79.6 in 2010.

Container Forecaster editor Neil Dekker said: “While our numbers are estimates, for example, the price of oil for the rest of 2009 is not easy to forecast, our analysis shows that the container sector is looking at a US$20bil black hole.”

“So we can expect more casualties and we believe that the industry will change as companies either go bust, amalgamate or shrink, shedding assets and personnel in the process… hardly a positive if it means experienced personnel will be leaving the industry,” he said in a statement.

One of the interesting facets of the current container situation is that business leaders seem to have conflicting views with one or two predicting recovery soon whilst others are not so sure.

Dekker said as independent advisers, Drewry was in a position to talk to carriers, shipowners and shippers.

The reality was that few, if any, of the actions carried out by the carriers to move away from the current abyss made sense, he reckons, adding that some business leaders privately agreed that strategies to protect market share and volume as opposed to revenue were suicidal.

“For Drewry, that acid test will be whether, in 10 years’ time, the industry will have learned the lessons from the downturn and follow business models that protect profits rather than risk-taking expansion and market share,” he said.

According to Container Forecaster, the business model of some of the smaller operators is proof that companies could operate profitably and are quietly expanding.

Larger companies, rather than bemoan the vagaries of an unforgiving market, needed to focus on sustainable solutions and try and resist the temptation for looking over their shoulders at market share, it said.

A big task, perhaps, given that market share has been the over-riding mindset for 40 years, it noted.

Launching new services in the hope for a summer peak might be short sighted and even illogical since it would put even more pressure on the current rate restoration initiatives going on in many key trades, it said, adding that selling vessels might reduce the strain for individual fleets, but the overall fleet size, and therefore the problem, remained.

Source: StarBiz

Shipping in the downturn - Sea of troubles

The recession is buffeting the world of shipping—with even rougher waters ahead

FROM the sheltered waters of Subic Bay in the Philippines to Falmouth on the south coast of England, a vast, swelling armada lies idle. In Asia’s deep-sea havens 750 vessels—container ships, bulk carriers, tankers, car carriers and others—are laid up. A further 280 are sheltering in European waters. According to Lloyd’s Marine Intelligence Unit, nearly 10% of the world’s merchant ships are swaying gently at anchor because of a collapse in global trade.

Since the recession bit hard last autumn a lot of attention has been paid to the plunge in the Baltic Dry Index, a composite measure of the cost of shipping bulk cargoes such as iron ore and coal. It fell by over 90% between June and October last year, although it has since recovered slightly and is hovering at just above a quarter of its peak. World trade in general remains in its worst slump for generations, although it too is no longer falling. Two of the biggest shipping banks (RBS and HBOS) are in state-backed rehab. The parlous state of the world economy could mean more shipping companies following Eastwind Maritime, which went bankrupt in June. On July 28th Hapag-Lloyd, Germany’s largest container-shipping company, secured a €330m ($468m) bail-out from its shareholders while it seeks up to €1.75 billion to keep it from sinking altogether.

Worse, there is a huge supply of new ships on order and due off the slipways over the next four years. For bulk carriers alone, the backlog is equivalent to more than two-thirds of existing capacity. Philippe Louis-Dreyfus, departing president of the European Community Shipowners’ Associations, has called for an industrywide scrappage scheme to shrink the surplus. Warning of a “bloodbath”, he said in June that shipping capacity would exceed the needs of the market by between 50% and 70% in the near future.

Nothing like this has been seen since the early 1970s, when lots of super-sized oil tankers, known as VLCCs (very large crude carriers), were built in expectation of huge growth in oil consumption just before the first oil shock. The result was a persistent surplus and no more orders for VLCCs for a decade. By the late 1990s the number of ships completed was running at around 1,300 a year. But from 2004 production picked up. Ships have also been getting larger (see chart). By last year annual completions were up by nearly 60% compared with a decade ago and the ships were 30% bigger. No wonder Lloyd’s List, an industry journal, is full of news of ship seizures and bankruptcies.

Yet a ray of sunshine is breaking through the storm clouds. The world’s shipbuilders are unlikely to convert all of their huge backlog of orders into deliveries given their unrealistic workloads and likely cancellations. Drewry Shipping Consultants estimates that nearly half the ships due to be delivered last year are still sitting on the slipway or the drawing board. Analysts at ICAP Shipping Research in London shrug off the idea that there will be a glut, since shipments of cheap Australian coal and iron ore to China have for years been constrained by a lack of big ships. More giant bulk carriers will lower the prices of ores delivered to China and stimulate trade growth, they say.

The outlook for tankers is less clear because of the volatility of crude-oil prices. Rates recovered strongly in June, according to ICAP, partly because large vessels were in demand for storage, as oil companies waited for crude prices to strengthen. Looking further ahead, the International Energy Agency expects oil demand to fall by 2.5m barrels a day this year, having already dropped by 300,000 b/d in 2008. But lower demand will be offset by a scheme to phase out single-hull ships on environmental and safety grounds in European and North Atlantic waters. The decline in production from mature oilfields in the North Sea and Alaska also means that replacement supplies will have to be hauled longer distances by sea to the refineries of Europe and North America.

The part of the shipping industry headed for the choppiest waters is the container trade, which had steamed ahead gloriously since the mid-1970s. The forging of global supply chains in the past 20 years, the rise in merchandise trade and the emergence of China as the workshop of the world created growing demand. Vessels became gigantic, with the latest capable of carrying 15,000 standard containers. Now the box trade, as it is called, is in the midst of its first decline. AXS Alphaliner, an information service that tracks the trade, has estimated that some 15% of capacity will be idle by October.

Shipping companies that operate the main container services linking Asia, America and Europe will lose about $20 billion this year, after making only $5 billion profit in 2008, according to Drewry. To blame is a $55 billion fall in expected revenues, only partly offset by savings from lay-ups, “slow steaming” to conserve fuel and opting for the longer and cheaper route round the Cape of Good Hope, which avoids hefty fees for using the Suez Canal. The canal faces a drop in revenue of 14% this year. Container rates have tumbled: before last summer it cost $1,400 to move a container from China to Europe; today the rate is barely $400. Chang Yung Fa, the boss of Evergreen group, the world’s fourth-largest container fleet, based in Taiwan, talks of a “gruesome” excess of capacity. Three years ago he dropped plans to order new ships. Now he is scrapping part of his 176-strong fleet.

The grim outlook for container shipping is not simply a reflection of the recession. There is a deeper concern. Containerisation helped to promote globalisation by reducing the cost of shipping goods so sharply that manufacturers could afford to search the world for factories where costs were lowest. As a result, the amount of sea transport involved in manufacturing a given product rose. But some analysts worry that this one-off restructuring may be almost complete. So even when the world economy recovers, the rapid expansion of container trade may not resume.

Source: The Economist

LNG Tankers to U.K. Rise; Kuwait and Italy Await First Cargoes

The number of liquefied natural gas tankers sailing to the U.K. increased in the last week before an intensification of North Sea field maintenance in August, ship-tracking data show.

Tankers sailing to Britain, Europe’s biggest gas market, climbed to four from three a week ago, according to AISLive data compiled by Bloomberg.

There may be as many as six LNG carriers heading to the U.K. now. One of them, the Arctic Princess, does not show the U.K. as its destination. Another, the Umm Slal, gives an arrival date of July 7.

OAO Gazprom bought a cargo of LNG from StatoilHydro ASA and sold it to Petroliam Nasional Bhd. of Malaysia to import into the Dragon LNG terminal in south Wales. The cargo is loaded on the Arctic Princess, Frederic Barnaud, LNG director at the U.K.- based unit Gazprom Global LNG, said over the phone.

Kuwait is to receive its first delivery of LNG next week at an import facility built by Excelerate Energy LLC.

The tanker Sohar LNG will arrive in the Gulf state on Aug. 4. A second ship, the Grand Elena, is scheduled to arrive on Aug. 9 from OAO Gazprom and Royal Dutch Shell Plc’s Sakhalin-2 plant off Russia’s east coast.

Exxon Mobil Corp.’s Italian LNG terminal will receive its first cargo next week, according to partner Edison SpA.

“It’s the first time, the first cargo,” Stefano Amoroso, a spokesman for Milan-basedEdison SpA, said today by telephone.

Signals today were captured from 148 vessels, 2 fewer than on July 24. That’s 48 percent of the global fleet of 310 LNG carriers.

Source: Bloomberg