Wednesday, September 30, 2009

World Naval Leaders To Talk About Combating Piracy

Naval leaders from around the globe will convene in Newport, Rhode Island, next week to discuss common maritime challenges and opportunities to enhance maritime security cooperation, including combating piracy, US Chief of Naval Operations Admiral Gary Roughead said here Wednesday.

Roughead said Malaysia's Chief of Navy Admiral Tan Sri Abdul Aziz Jaafar, who had accepted the invitation to attend one of the largest gatherings of maritime leaders in history, had been invited to lead a panel discussion at the three-day symposium from Oct. 7.

Malaysia, Singapore, Indonesia and Thailand had successfully worked together to combat piracy in the Straits of Melaka and in the rest of the region by sharing information and naval cooperation in fighting piracy, leading to a dramatic drop in incidents, he told Bernama.

Both US naval intelligence and the International Maritime Bureau in Kuala Lumpur, which tracks piracy worldwide, reported a decline in sea robbery as navies and coast guards had gone on the offensive.

Malaysia had provided significant contribution in the fight against piracy off Somalia, and the lessons and experiences, and the successful collaborative efforts in Africa would be shared at the upcoming meeting, Roughead said.

Malaysia is part of an international patrol contingent of some two dozen warships from countries, including the US, Russia and members of the European Union, in anti-piracy efforts in the Gulf of Aden.

The biennial 19th International Seapower Symposium this year celebrates the 40th anniversary of the gathering. To date 106 nations have confirmed participation in the event.

For the first time, Russia and Vietnam are sending senior officers as delegates compared with previous years where they sent naval attaches.

Noticeably absent is China. "No, China will not attend," Roughead said.

Source: Bernama

Tuesday, September 29, 2009

Cekap Container

Cekap Container is a subsidiary of the Eng Hoe Shipping Group based in Port Klang. The Group traces it's roots to the 1930s when Port Klang was still known as Port Swettenham.

Monday, September 28, 2009

North Butterworth Container Terminal records highest volume

North Butterworth Container Terminal (NBCT) last month handled 92,439 twenty-foot equivalent units (TEUs), which is the highest volume achieved in a single month in its 35-year history, said Penang Port Sdn Bhd general manager Obaid Mansor.

“The average volume of cargo handled in a month is between 77,000 and 87,000 TEUs.

“In August last year, NBCT handled 85,505 TEUs and in August 2007, it was 78,624 TEUs,” Obaid told StarBiz, adding that it handled 87,879 TEUs in July.

He said NBCT was now optimistic the total volume of cargo handled this year would not decline by 5.5% as forecast in July.

“Cargo-handling activities in the fourth quarter should remain stable and NBCT should handle as much cargo this year as it did in 2008, which was 929,000 TEUs.

“We expect a lot of cargo such as furniture products and consumer electrical goods such as televisions, washing machines and refrigerators to arrive at NBCT in the fourth quarter, as wholesalers in the north would be stocking up to prepare for the festive season,” he said.

Obaid said the increased cargo-handling activities in August was due to a number of factors.

These include the greater volume of rubber-based cargo from southern Thailand exported via NBCT to other parts of Asia, the higher imports of steel scrap by steel mills in the north, and a bigger volume of empty containers coming from the Middle East and India.

“Empty containers comprised about 25% of the volume handled. They generate revenue as NBCT levies handling charges on their owners,” he said.

Export of rubber-based cargo and import of steel scrap were key indicators that the economy in the region was picking up, Obaid said.

“It shows that the effects of the stimulus packages are already kicking in. The import of steel scrap is an indicator that development projects in the north are resuming.”

Obaid said NBCT expected to handle over 80,000 TEUs of cargo this month.

He said the slight drop was expected as the bulk of restocking activities had taken place in August.

“The new seven post-Panamax gantry cranes worth RM175mil, coming in October, will increase the volume of cargo handled annually to over one million TEUs,” he said.

The cranes would be put into action in the second quarter next year, he added.

Source: StarBiz

Sunday, September 27, 2009

Westports awaits clearer signal to expand terminal

Westports Malaysia Sdn Bhd will commence its RM600mil terminal expansion next year if the global economy keeps improving and starts contributing to the growth of its container volume.

Executive director Ruben Emir Gnanalingam said the project to build container terminal six was to have started last year but was postponed as the port had not reached its internal trigger point that should prompt the expansion for extra capacity.

“Our capacity now is about seven million twenty-foot equivalent units (TEUs) and we expect to handle only 4.3 million to 4.4 million TEUs this year.

“All the tender specifications for the project are ready as they are quite similar to our previous terminal expansion projects,” he told StarBiz.

Ruben said Westports had recently revised upward its targeted volume for this year from four million TEUs due to the month-on-month steady growth from the first quarter.

“The earlier target for 2009 was lower due to the sharp slump trend started in the last quarter last year.

“But the trend has been improving in the second quarter with average monthly volume of 360,000 TEUs, and even better in the current quarter with 400,000 TEUs,” he said.

Year-on-year, he added, the current third quarter still fared behind as Westports did very well in its third quarter last year with a record-breaking 475,000 TEUs in August.

Westports handled about 4.97 million TEUs in 2008.

On the global economic crisis, Ruben said Westports managed to identify and practised sustainable cost-cutting measures during the not “too busy” period to be more resilient in the future.

“We have not been able to really study our cost-saving measures previously as we were too busy with the rapid growth. But now, once we have identified the areas where we can cut costs, we will sustain the practice.

“We also managed to focus on intensive staff training in the lull period as Westports did not retrench any workers although its volume was down earlier in the year,” he said, noting that the port employed about 3,250 workers.

He said the training and cost-cutting measures made the port even more prepared to seize opportunities when the economy picked up.

On its mission to make Port Klang a bigger hub in the region, Ruben said Westports, which recently celebrated its 15th anniversary, would continue to focus on enhancing its productivity and services.

“We will also be looking at improving bunkering and feedering activities at the port,” he said.

Feedering is a process where smaller ports feed containers to hub ports as the latter have higher connectivity due to more calls made by shipping lines, while bunkering is fuel supply services to vessels.

Westports’ feedering activities come from ports in South-East Asia and India.

He said it was important for Port Klang to strive to be a bigger hub as it would not only benefit the port but also local importers and exporters.

“There is a huge difference between the freight rates of a non-hub port and a hub port. The freight rates at the hub port is cheaper due to the competitiveness of the many shipping lines, volume and the availability of empty containers,” he said.

Ruben said Westports had come a long way from its inception in 1994 and would continue focusing on sustainable development that included the Pulau Indah community and the environment.

“Apart from making the island more industrious with job opportunities and supporting services to the port, we now want to make it more friendly with communal facilities.

“For the environment, Westports – which is already known for its ‘garden port’ concept – will try to plant more trees,” he said.

Source: StarBiz

Friday, September 25, 2009

Maersk sues Suria Capital

SURIA CAPITAL HOLDINGS BHD unit Sabah Ports Sdn Bhd (SPSB) has been served with a writ of summons by Denmark-based AP Moeller — Maersk A/S (Maersk) over its cargo damaged at SPSB’s container yard.

In a filing to Bursa Malaysia Securities yesterday, Suria said the plaintiff was seeking indemnity or payment from SPSB totalling US$30,692.08 (RM106,501.51) for the damaged cargo stored at the Sapangar Bay Container Port.

It said Maersk alleged that SPSB had negligently and/or in breach of its duties owed as bailee of the container and cargo, failed to ensure that the container was plugged in to power supply for four days and had thereby exposed the cargo to heat damage.

Suria said the consignee had rejected the entire consignment of the cargo upon knowing that the container was not plugged into power source for four days. It said Maersk, which had settled the shipper’s claim of US$30,692.08 had now commenced the suit against SPSB to seek indemnity in respect of the settlement sum paid towards the shipper.

Source: EdgeDaily

Thursday, September 24, 2009

Penang Port MD responds

Let me run the port while you run the state government, was the retort of a visible upset Penang Port Sdn Bhd (PPSB) managing director Datuk Ahmad Ibni Hajar.

Ahmad was responding to a statement by Chief Minister Lim Guan Eng who had called on the federal government to focus more attention on the port following a report that the port's container throughput had declined by 24.2% for the second quarter of this year.

Clarifying the report quoting Datuk Captain Abdul Rahim Abd Aziz, the transport ministry’s special maritime adviser who released the national figures for all ports in late July, Ahmad said Lim should have checked his facts with PPSB before making the damaging statement which was carried by most newspapers including online websites and wire services.

PPSB has since rectified Abdul Rahim's statement.

The port had in fact achieved a 13% growth compared to 1Q this year and not a 24.2% decline as perceived by the Penang state government.

"What do you achieve by such a statement? Following the publication of the statement, I even received a call from our bankers which could affect our ratings.

"The report by Abdul Rahim had in fact been clarified right after that report was published and the media should get the correct figures from us and not from jokers who do not even know what TEUs (twenty-foot equivalent units) are.

"You should run the state government and let me run my port which I have done for the past 12 years.

"If we are in need of help, we know exactly what to do.

"There have been just too many people talking about the PPSB, from the state government to the Penang Port Commission and even NGOs.

"Please stop talking negatively about the port.

"Come and see me instead of blowing things out of proportion. As a leader, he (Lim) should say only what is factual," said Ahmad.

He said although PPSB subsidises the ferry services by RM10 million to RM20 million each year, it did not complain, but others have been doing so, hinting at the PPC which has been making statements about the ferry services of late.

He said instead of interfering, the state government could help by solving various problems which already have been highlighted to the state government including the delay of the Penang Sentral project, traffic congestion, cleanliness and also discount for land premiums for the PPSB which had also been granted by the previous state government.

"The statement was even read all over the world, which is not funny as our reputation has been damaged by the report when it is not true," Ahmad said at a press conference.

Hitting out at the state government, Ahmad said the state government should help the port instead of interfering in the port's affairs.

"Since PPSB was incorporated, we have achieved triple in volume of container handling from 1994, from 368,000 to 930,000 TEUs in 2008.

"We have also doubled in volume the cargo handling from 1994 from 15 million tonnes to 26 million tonnes in 2008.
"Our revenue has also doubled from RM139 million in 1994 to RM227 million in 2008.

"Our assets have tripled from RM448 million in 1994 to RM1.1 billion in 2008 even though our paid-up capital remains at RM73 million since incorporation," he added.

He said last month, the port handled 92,459 TEUs which was the best ever recorded in the history of the port.

For 3Q this year, Ahmad said more than a 12% increase in TEUs was anticipated from 2Q.

Lim on Tuesday had asked the federal government to focus more attention on the port following the drop in container traffic and said the decline was a warning to the finance ministry to inject fresh funds and new ideas into Penang Port.

He had also said that questions were being asked on the role played by the regulatory body PPC, to revitalise the Penang Port and reverse the downward trend in container traffic.

Source: EdgeDaily

Tuesday, September 22, 2009

Help keep Penang Port afloat, Govt urged

The Federal Government should seriously consider restoring Penang’s free-port status, given the decline in container traffic.

The 24% decline was a warning for the Finance Ministry to inject fresh funds and new ideas into Penang Port Sdn Bhd, said Chief Minister Lim Guan Eng.

He said such a move was needed to save the port, which reported the decline in the second quarter of the year, when all others in the country recorded increases.

“The Marine Department revea-led that Malaysian ports handled 10% more containers in the second quarter of the year compared to the first, reflecting a recovery in both domestic and transhipment cargo,” he said in a statement yesterday.

“However, Penang Port was the only one showing a decline.”

He said the time had come to take bold steps to introduce creativity, and innovative methodology and management to revive Penang Port.

“With the Penang Port Commission’s promised completion of the Swettenham Pier by this month remaining unfulfilled, the ministry should intervene and actively engage in the activities at Penang Port.”

Source: StarOnline

South China Sea new base for pirates’ operations

Increased naval patrols in the Malacca Straits have forced pirates in Asia to move their operations to the South China Sea, where the number of attacks on ships is at a five-year high, an official said yesterday.

Regional Cooperation Agree-ment on Combating Piracy and Armed Robbery against Ships in Asia (ReCAAP)’s Amy Fang said that at least 10 ships had been attacked in the area so far this year, the latest on Saturday when six pirates boarded a Singapore-registered liquefied petroleum gas tanker.

The attackers assaulted the duty officer and robbed the ship’s crew, she said.

Fang said it was “worrying” that 10 attacks had taken place with more than three months still to go this year, compared to nine attacks in the whole of 2005.

“The pirates seem to have heavier weapons than before, and are attacking ships rather than just threatening the crew,” she said.

The Singapore-based ReCAAP is an information-sharing group sponsored by 17 countries in the region to fight piracy.

She said the increased piracy in the South China Sea seemed to be the result of greater security in Malacca Straits, which was once one of the most pirate-infested sea lanes in the world.

“But the waterway is virtually free of the problem now, thanks to joint patrolling and intelligence sharing by Malaysia, Indonesia, Singapore and Thailand.

“Only two pirate attacks were reported in the Malacca Straits in 2008 and one hijacking this year, compared to seven attacks in 2007.

According to ReCAAP, a total of 38 ships were attacked in Asia in the first six months of the year, of which eight were hijacked while the remaining were robbed on high seas.

Of the eight hijackings, seven were in South China Sea.

Source: StarOnline

Sunday, September 20, 2009

Sea piracy hits five-year high in waters near Singapore

The waters in and around Singapore have become more dangerous for ships this year. Piracy hit a five-year high in the South China Sea, with 10 reports of sea attacks reported there so far this year, surpassing the previous record of nine in 2005.

Sea robbers have also been active in the Strait of Malacca and Strait of Singapore. Pirates have boarded ships on five occasions so far this year and made an attempted boarding once.

Over the same period in these two waterways last year, pirates pulled off only one attack and made three attempts.

The figures come from the ReCAAP Information-Sharing Centre, which noted that the worst-hit vessels have been oil tankers and large container ships.

ReCAAP stands for Regional Cooperation Agreement on Combating Piracy and Armed Robbery against Ships in Asia.

Lee Yin Mui, ReCAAP’s assistant director of research, added that bandits often hijack and take hostages on board the more vulnerable and slow-moving tugboats.

In the 10 incidents in the South China Sea, pirates boarded the ship nine times and made one attempted boarding.

In the most recent attack, six pirates armed with knives and machetes boarded the Singapore-registered liquified petroleum gas tanker Prospect off Anambas Island in the South China Sea early on Saturday.

They clubbed the duty officer on the head and escaped with cash, cellphones and laptop computers.

Apart from the officer, who was bruised, the other members of the 20-strong crew — Indian nationals and Filipinos — were unhurt.

Lee told The Straits Times that the surge in such attacks in the South China Sea and neighbouring waterways was ‘disconcerting’ because it laid waste to the impression that piracy is on the decline in Asian waters.

The latest figures from ReCAAP indicate that the number of reported cases has fallen over the last five years, from 148 in 2005 to 96 last year.

Between January and last month, the anti-piracy centre received 57 reports of sea attacks or robberies in Asia.

The situation in this part of the world is still a far cry from the escalating violence in the Gulf of Aden.

The London-based International Maritime Bureau’s piracy reporting centre in Kuala Lumpur has logged 156 attacks there so far this year.

But Lee, 48, a former army officer, noted that the buccaneers striking in Asia were not driven by bloodlust. They mostly wanted cash, ropes and spare parts from vessels, she said.

She cautioned, however, that although the economy seemed to be on the mend, pirates or sea robbers would still be on the lookout for vulnerable vessels.

“If shippers let their guard down, they will just be encouraging pirates to strike.”

For its part, ReCAAP is already in talks with the governments of Singapore, Indonesia, Malaysia and Thailand to keep them updated regarding the surge in attacks.

The navies of these four countries, which form the Malacca Strait Patrol, will be beefing up their watch over their waters.

ReCAAP, formed by 15 nations — including the above four and China, Japan, South Korea, Norway and India — will also streamline its reporting and strengthen its information-sharing capabilities.

This will ensure that member countries can quickly despatch their navy or Police Coast Guards to break up sea conflicts.

Joshua Ho, a senior fellow at the S.Rajaratnam School of International Studies, said countries bordering the South China Sea should also consider forming a patrol group similar to the Malacca Strait Patrol.

They include Japan, China, the Philippines, Vietnam and Singapore, among others. These countries now limit their patrols to approved maritime boundaries.

Ho said: “Some sort of joint effort is feasible and the security presence would make pirates think twice before striking.”

Source: MalaysianInsider

Saturday, September 19, 2009

Ratings on MISC affirmed At 'A-', negative outlook

Standard & Poor's Ratings Services has affirmed its 'A-' corporate credit rating on MISC BHD but the outlook on the rating remains negative.

The rating on US$700 million notes due in 2014, issued by MISC Capital (L) Ltd., has also been affirmed at 'A-'.

The international rating agency said on Sept 18 the rating on MISC reflected the company's stable recurring cash flow from long-term charter contracts secured by the liquefied natural gas (LNG) and offshore business units.

Other positive factors were the strengthening position in the heavy engineering market, strong track record in petroleum shipping, and dominant position in lightering operations in the Gulf of Mexico region.

The rating also benefits from MISC's integral position as an important subsidiary of Petronas (foreign currency A-/Stable/--, local currency A+/Stable/--, ASEAN scale 'axAAA').

Directly and indirectly, Petronas accounted for approximately 51% of MISC's operating profit before liner and chemical segment losses in the financial year ended March 31, 2009.

However, these strengths are tempered by the inherently high-risk shipping industry, due to its cyclical and capital-intensive nature, as well as its volatile market conditions, which have resulted in losses in MISC's container shipping business, exerting pressure on its credit ratios.

"The rating also reflects the possibility of higher leverage as MISC takes delivery of new debt-funded vessels over the next few years," said Standard & Poor's credit analyst Manuel Guerena.

MISC is the world's third-largest publicly traded shipping company by market capitalization. It also has the world's largest owned LNG carrier fleet and third-largest Aframax fleet.

MISC is 62.4% owned by Petronas. Hence, MISC has strategic importance to Malaysia's position as the world's third-largest LNG exporting nation.

Despite this, the company's performance has not escaped the weak industry conditions that have seen lower earnings in the LNG and chemical shipping segments, and an operating loss before tax of US$255 million in its container shipping segment in fiscal 2009.

"The company plans for US$3.4 billion in capital expenditures in the next three years, primarily in the offshore, petroleum and heavy engineering segments with funding that could put additional pressure on MISC's financial risk profile," Guerena said.

MISC's FFO to total debt and OLA gross debt to EBITDA ratios could deteriorate further, if MISC keeps on increasing its debt to pursue its capital expenditure plan. However, potential changes in its funding structure could offset these challenges.

The negative rating outlook reflects the severe downturn in the shipping industry, particularly the container shipping segment, which is exerting pressure on MISC's credit protection measures. It also captures uncertainty surrounding the funding plan for MISC's ongoing capital expenditure.

Source: EdgeDaily

Friday, September 18, 2009

Revealed: The ghost fleet of the recession anchored just east of Singapore

The biggest and most secretive gathering of ships in maritime history lies at anchor east of Singapore. Never before photographed, it is bigger than the U.S. and British navies combined but has no crew, no cargo and no destination - and is why your Christmas stocking may be on the light side this year

The 'ghost fleet' near Singapore

The 'ghost fleet' near Singapore. The world's ship owners and government economists would prefer you not to see this symbol of the depths of the plague still crippling the world's economies

The tropical waters that lap the jungle shores of southern Malaysia could not be described as a paradisical shimmering turquoise. They are more of a dark, soupy green. They also carry a suspicious smell. Not that this is of any concern to the lone Indian face that has just peeped anxiously down at me from the rusting deck of a towering container ship; he is more disturbed by the fact that I may be a pirate, which, right now, on top of everything else, is the last thing he needs.

His appearance, in a peaked cap and uniform, seems rather odd; an officer without a crew. But there is something slightly odder about the vast distance between my jolly boat and his lofty position, which I can't immediately put my finger on.

Then I have it - his 750ft-long merchant vessel is standing absurdly high in the water. The low waves don't even bother the lowest mark on its Plimsoll line. It's the same with all the ships parked here, and there are a lot of them. Close to 500. An armada of freighters with no cargo, no crew, and without a destination between them.

Simon Parry among the ships in southern Malaysia

Simon Parry among the ships in southern Malaysia

My ramshackle wooden fishing boat has floated perilously close to this giant sheet of steel. But the face is clearly more scared of me than I am of him. He shoos me away and scurries back into the vastness of his ship. His footsteps leave an echo behind them.

Navigating a precarious course around the hull of this Panama-registered hulk, I reach its bow and notice something else extraordinary. It is tied side by side to a container ship of almost the same size. The mighty sister ship sits empty, high in the water again, with apparently only the sailor and a few lengths of rope for company.

Nearby, as we meander in searing midday heat and dripping humidity between the hulls of the silent armada, a young European officer peers at us from the bridge of an oil tanker owned by the world's biggest container shipping line, Maersk. We circle and ask to go on board, but are waved away by two Indian crewmen who appear to be the only other people on the ship.

'They are telling us to go away,' the boat driver explains. 'No one is supposed to be here. They are very frightened of pirates.'

Here, on a sleepy stretch of shoreline at the far end of Asia, is surely the biggest and most secretive gathering of ships in maritime history. Their numbers are equivalent to the entire British and American navies combined; their tonnage is far greater. Container ships, bulk carriers, oil tankers - all should be steaming fully laden between China, Britain, Europe and the US, stocking camera shops, PC Worlds and Argos depots ahead of the retail pandemonium of 2009. But their water has been stolen.

They are a powerful and tangible representation of the hurricanes that have been wrought by the global economic crisis; an iron curtain drawn along the coastline of the southern edge of Malaysia's rural Johor state, 50 miles east of Singapore harbour.

Fisherman Ah Wat

'We don't understand why they are here. There are so many ships but no one seems to be on board,' said local fisherman Ah Wat

It is so far off the beaten track that nobody ever really comes close, which is why these ships are here. The world's ship owners and government economists would prefer you not to see this symbol of the depths of the plague still crippling the world's economies.

So they have been quietly retired to this equatorial backwater, to be maintained only by a handful of bored sailors. The skeleton crews are left alone to fend off the ever-present threats of piracy and collisions in the congested waters as the hulls gather rust and seaweed at what should be their busiest time of year.

Local fisherman Ah Wat, 42, who for more than 20 years has made a living fishing for prawns from his home in Sungai Rengit, says: 'Before, there was nothing out there - just sea. Then the big ships just suddenly came one day, and every day there are more of them.

'Some of them stay for a few weeks and then go away. But most of them just stay. You used to look Christmas from here straight over to Indonesia and see nothing but a few passing boats. Now you can no longer see the horizon.'

The size of the idle fleet becomes more palpable when the ships' lights are switched on after sunset. From the small fishing villages that dot the coastline, a seemingly endless blaze of light stretches from one end of the horizon to another. Standing in the darkness among the palm trees and bamboo huts, as calls to prayer ring out from mosques further inland, is a surreal and strangely disorientating experience. It makes you feel as if you are adrift on a dark sea, staring at a city of light.

Ah Wat says: 'We don't understand why they are here. There are so many ships but no one seems to be on board. When we sail past them in our fishing boats we never see anyone. They are like real ghost ships and some people are scared of them. They believe they may bring a curse with them and that there may be bad spirits on the ships.'

Two container ships tied together in Sungai Rengit, southern Malaysia

Two container ships tied together in southern Malaysia, waiting for the next charter

As daylight creeps across the waters, flags of convenience from destinations such as Panama and the Bahamas become visible. In reality, though, these vessels belong to some of the world's biggest Western shipping companies. And the sickness that has ravaged them began far away - in London, where the industry's heart beats, and where the plummeting profits and hugely reduced cargo prices are most keenly felt.

The Aframax-class oil tanker is the camel of the world's high seas. By definition, it is smaller than 132,000 tons deadweight and with a breadth above 106ft. It is used in the basins of the Black Sea, the North Sea, the Caribbean Sea, the China Sea and the Mediterranean - or anywhere where non-OPEC exporting countries have harbours and canals too small to accommodate very large crude carriers (VLCC) or ultra-large crude carriers (ULCCs). The term is based on the Average Freight Rate Assessment (AFRA) tanker rate system and is an industry standard.

A couple of years ago these ships would be steaming back and forth. Now 12 per cent are doing nothing

You may wish to know this because, if ever you had an irrational desire to charter one, now would be the time. This time last year, an Aframax tanker capable of carrying 80,000 tons of cargo would cost £31,000 a day ($50,000). Now it is about £3,400 ($5,500).

This is why the chilliest financial winds anywhere in the City of London are to be found blowing through its 400-plus shipping brokers.

Between them, they manage about half of the world's chartering business. The bonuses are long gone. The last to feel the tail of the economic whiplash, they - and their insurers and lawyers - await a wave of redundancies and business failures in the next six months. Commerce is contracting, fleets rust away - yet new ship-builds ordered years ago are still coming on stream.

World shipping is tracked by satellite service Vesseltracker

World shipping is tracked by satellite service Vesseltracker

Just 12 months ago these financiers and brokers were enjoying fat bonuses as they traded cargo space. But nobody wants the space any more, and those that still need to ship goods across the world are demanding vast reductions in price.

Do not tell these men and women about green shoots of recovery. As Briton Tim Huxley, one of Asia's leading ship brokers, says, if the world is really pulling itself out of recession, then all these idle ships should be back on the move.

South China Sea map

'This is the time of year when everyone is doing all the Christmas stuff,' he points out.

'A couple of years ago those ships would have been steaming back and forth, going at full speed. But now you've got something like 12 per cent of the world's container ships doing nothing.'

Aframaxes are oil bearers. But the slump is industry-wide. The cost of sending a 40ft steel container of merchandise from China to the UK has fallen from £850 plus fuel charges last year to £180 this year. The cost of chartering an entire bulk freighter suitable for carrying raw materials has plunged even further, from close to £185,000 ($300,000) last summer to an incredible £6,100 ($10,000) earlier this year.

Business for bulk carriers has picked up slightly in recent months, largely because of China's rediscovered appetite for raw materials such as iron ore, says Huxley. But this is a small part of international trade, and the prospects for the container ships remain bleak.

Some experts believe the ratio of container ships sitting idle could rise to 25 per cent within two years in an extraordinary downturn that shipping giant Maersk has called a 'crisis of historic dimensions'. Last month the company reported its first half-year loss in its 105-year history.

Martin Stopford, managing director of Clarksons, London's biggest ship broker, says container shipping has been hit particularly hard: 'In 2006 and 2007 trade was growing at 11 per cent. In 2008 it slowed down by 4.7 per cent. This year we think it might go down by as much as eight per cent. If it costs £7,000 a day to put the ship to sea and if you only get £6,000 a day, than you have got a decision to make.

'Yet at the same time, the supply of container ships is growing. This year, supply could be up by around 12 per cent and demand is down by eight per cent. Twenty per cent spare is a lot of spare of anything - and it's come out of nowhere.'

These empty ships should be carrying Christmas over to the West. All retailers will have already ordered their stock for the festive season long ago. With more than 92 per cent of all goods coming into the UK by sea, much of it should be on its way here if it is going to make it to the shelves before Christmas.

Large ships off the coastline close to Sungai Rengit

Lights from the fleet of ships illuminate the night-time horizon

But retailers are running on very low stock levels, not only because they expect consumer spending to be down, but also because they simply do not have the same levels of credit that they had in the past and so are unable to keep big stockpiles.

Stopford explains: 'Globalisation and shipping go hand in hand. Worldwide, we ship about 8.2 billion tons of cargo a year. That's more than one ton per person and probably two to three tons for richer people like us in the West. If the total goes down by five per cent or so, that's a lot of cargo that isn't moving.'

The knock-on effect of so many ships sitting idle rather than moving consumer goods between Asia and Europe could become apparent in Britain in the months ahead.

'We will find out at Christmas whether there are enough PlayStations in the shops or not. There will certainly be fewer goods coming in to Britain during the run-up to Christmas.'

Three thousand miles north-east of the ghost fleet of Johor, the shipbuilding capital of the world rocks to an unpunctuated chorus of hammer-guns blasting rivets the size of dustbin lids into shining steel panels that are then lowered onto the decks of massive new vessels.

As the shipping industry teeters on the brink of collapse, the activity at boatyards like Mokpo and Ulsan in South Korea all looks like a sick joke. But the workers in these bustling shipyards, who teem around giant tankers and mega-vessels the length of several football pitches and capable of carrying 10,000 or more containers each, have no choice; they are trapped in a cruel time warp.

There have hardly been any new orders. In 2011 the shipyards will simply run out of ships to build

A decade ago, South Korean President Kim Dae-jung (who died last month) issued a decree to his industrial captains: he wished to make his nation the market leader in shipbuilding. He knew the market intimately. Before entering politics, he studied economics and worked for a Japanese-owned freight-shipping business. Within a few years he was heading his own business, starting out with a fleet of nine ships.

Thus, by 2004, Kim Dae-jung's presidential vision was made real. His country's low-cost yards were winning 40 per cent of world orders, with Japan second with 24 per cent and China way behind on 14 per cent.

But shipbuilding is a horrendously hard market to plan. There is a three-year lag between the placing of an order and the delivery of a ship. With contracts signed, down-payments made and work under way, stopping work on a new ship is the economic equivalent of trying to change direction in an ocean liner travelling at full speed towards an iceberg.

Thus the labours of today's Korean shipbuilders merely represent the completion of contracts ordered in the fat years of 2006 and 2007. Those ships will now sail out into a global economy that no longer wants them.

Maersk announced last week that it was renegotiating terms and prices with Asian shipyards for 39 ordered tankers and gas carriers. One of the company's executives, Kristian Morch, said the shipping industry was in uncharted waters.

As he told the global shipping newspaper Lloyd's List only last week: 'You have a contraction of oil demand, you have a falling world economy and you have a contraction of financing capabilities - and at the same time as a lot of new ships are being delivered.'

Demand peaked in 2005 when, with surplus tonnage worldwide standing at just 0.7 per cent, ship owners raced to order, fearing docks and berths at major shipyards would soon be fully booked. That spell of 'panic buying' has heightened today's alarming mismatch between supply and demand.

Keith Wallis, East Asia editor of Lloyd's List, says, 'There was an ordering frenzy on all types of vessel, particularly container ships, because of the booming trade between Asia and Europe and the United States. It was fuelled in particular by consumer demand in the UK, Europe and North America, as well as the demand for raw materials from China.'

Cranes at Singapore Dock stand idle, waiting for work

Cranes at Singapore Dock stand idle, waiting for work

Orders for most existing ships to be delivered within the next six to nine months would be honoured, he predicted, and the ships would go into service at the expense of older vessels in the fleet, which would be scrapped or end up anchored off places like southern Malaysia.

But, says Wallis, 'some ship owners won't be able to pay their final instalments when the vessels are completed. Normally, they pay ten per cent down when they order the ship and there are three or four stages of payment. But 50 to 60 per cent is paid on delivery.'

South Korean shipyard Hanjin Heavy Industries last week said it had been forced to put up for sale three container ships ordered at a cost of £60 million ($100 million) by the Iranian state shipping line after the Iranians said they could not pay the bill.

'The prospects for shipyards are bleak, particularly for the South Koreans, where they have a high proportion of foreign orders. Whole communities in places like Mokpo and Ulsan are involved in shipbuilding and there is a lot of sub-contracting to local companies,' Wallis says.

'So far the shipyards are continuing to work, but the problems will start to emerge next year and certainly in 2011, because that is when the current orders will have been delivered. There have hardly been any new orders in the past year. In 2011, the shipyards will simply run out of ships to build.'

Christopher Palsson, a senior consultant at London-based Lloyd's Register-Fairplay Research, believes the situation will worsen before it gets better.

'Some ships will be sold for demolition but the net balance will be even further pressure on the freight rates and the market itself. A lot of ship owners and operators are going to find themselves in a very difficult situation.'

The current downturn is the worst in living memory and more severe even than the slump of the early Eighties, Palsson believes.

'Back then the majority of the crash was for tankers carrying crude oil. Today we have almost every aspect of shipping affected - bulk carriers, tankers, container carriers... the lot.

'It is a much wider-spread situation that we have today. China was not a major player in the world economy at that time. Neither was India. We had the Soviet Union. We had shipbuilding in the United Kingdom and Europe.

'But then, back in those days the world was a very different place.'


Read also the contrarian view offered here.

Tuesday, September 15, 2009

Pirates attempt to board two tankers south of Malaysia

Pirates attempted to board two tankers in a busy shipping lane off southern Malaysia on Monday, a regional government security agency said.

Five men tried to board Panama-registered tanker Pacific Harmony early yesterday near the southern Malaysian port of Tanjung Ayam, just to the east of Singapore, according to the Regional Cooperation Agreement on Combating Piracy and Armed Robbery against Ships in Asia (ReCAAP).

The men fled on hearing the ship's alarm system.

Two hours later, six men with long knives tried to board Malaysia-registered chemical tanker MMM Kingston. They fled in a speedboat after seeing the crew had been alerted.

ReCAAP said the same group was probably involved and advised shipping crews to take precautions since there had been six such cases this year in the area, all during the night while the ships were anchored.

"That area is high risk ... there have been a number of attacks in that area," said Noel Choong, head of the International Maritime Bureau's piracy reporting centre in Kuala Lumpur, confirming the two attacks.

Many ships have been laid up in the waters around Singapore, the world's busiest container port and a key refuelling hub, after the slide in global trade following the financial crisis.

Source: Business Times

Friday, September 11, 2009

Hapag-Lloyd on track to get state aid

Auditors have found that Germany's Hapag-Lloyd has fulfilled the criteria set to qualify for Euro1.2 billion (Euro1 = RM5.10) in state loan guarantees, a person familiar with the proceedings said.

The shipping line, owned by TUI AG and Albert Ballin, has suffered from the drop in world trade and a German committee is due to decide on its application for state aid on September 18.

A person close to the situation said late on Thursday an assessment from auditors at PriceWaterhouseCoopers had concluded Hapag-Lloyd looked to be on track in fulfilling conditions to obtain the aid.

The company's owners have agreed to give the company a Euro923 million cash injection to boost its chances to clinch the aid package, several sources close to the owners said last week.

Source: Business Times

Tuesday, September 8, 2009

KLIA: Big cargo pile-up after Customs system failure

A breakdown of the Customs Department's electronic document processing system has caused a backlog which is costing shipping and forwarding agents millions of ringgit a day.

The mainframe of the department's online computerised system broke down on Sept 2 and clearing processes, which usually take two hours, now take more than 24 hours.

The mainframe, located at the Kuala Lumpur International Airport's cargo complex in Sepang, is connected to airports, seaports and border checkpoints.

Sources told the New Straits Times that the system failure had severed the link between the electronic data interchange (EDI) connection server and Customs, forwarders and agents.

Clearing processes now are being done manually but work is hampered by shortage of Customs personnel, creating long queues and a stockpile of uncleared cargo, including perishable items.

Dagang Net Technologies Sdn Bhd, which provides the EDI connection for the 150-odd airfreight forwarders -- 90 per cent of whom are multi-nationals -- is working overtime to solve the problem.

Customs deputy director-general (management) Ghazali Ahmad, however, described the problem as a "minor hiccup".

Ghazali said they were monitoring the situation round the clock through their information technology specialists.

"We are trying to improve the situation so as not to inconvenience customers who will suffer loss of time and money.

"At the same time, we want to speed up the manual transactions."

Airfreight Forwarders Association of Malaysia (AFAM) chairman Walter Culas said the manual procedure was time consuming, costly and affects efficiency of the forwarding industry.

"An electronic transaction that usually takes two hours now has to be done manually over a 24-hour period."

This, Culas said, was causing a massive slowdown in cargo turn-around, with delays in delivery of goods which in turn caused stockpiles at the warehouses.

"As freight forwarders, we have to absorb delayed expenses. Overheads have increased by 200 per cent to cover additional manpower and demurrage charges. This can cripple our business and eventually affect the country's economy."

Culas said he had highlighted the matter to Customs director-general Datuk Ibrahim Jaapar and Dagang Net Technologies chief executive officer Zaharin Ali, who were equally concerned.

"I have also written to the Transport, Finance and International Trade and Industry ministries for assistance and advice.

"I hope measures are taken to address the matter urgently to safeguard our industry and the country's economy."

Time Engineering Berhad's corporate services spokesman Zulina Mohamad Salleh, whose outfit is Dagang Net Technologies' holding company, said they had sent a team of five systems engineers to address the situation.

"We are still attempting to establish the cause of the problem. It is too early to say anything right now."

Zulina added that the engineers were trying to verify which of the two portions -- one linking the EDI with Customs and the other with the airfreight forwarders -- was malfunctioning.

Source: Business Times

Sunday, September 6, 2009

Sumatec To Dispose Of Shipping Units For RM77 Million

Sumatec Resources Bhd has proposed to dispose of its shipping related subsidiaries to a newly incorporated company (Newco) for RM77 million.

The subsidiaries involved are Semado Maritime Sdn Bhd, Semua Shipping Sdn Bhd, Semua Chemical Shipping Sdn Bhd and Mini Tanker Chartering Sdn Bhd (collectively referred to as Semua Group), said AmInvestment Bank Bhd in a statement to Bursa Malaysia.

It said Sumatec today entered into a heads of agreement with Ethos Capital One Sdn Bhd (ECO), Employees Provident Fund (EPF) and an MBO team comprising Bong Siet Fah, Captain Teng Keng Han and Captain Hu Tai Hui to effect the transaction.

Pursuant to the terms of subscription agreements to be executed at a later date, ECO, EPF, MBO Team and Sumatec will become direct/indirect shareholders of Newco.

"ECO, EPF and MBO Team will provide their expertise to improve the operational and financial capabilities as well as the prospects of Semua Group with the intention of eventually positioning Newco for listing in the future," AmInvestment Bank said.

The disposal consideration includes RM65 million in cash which will be entirely utilised to pare down Sumatec's existing borrowings as well as for working capital purposes.

AmInvestment said Sumatec and MBO Team had also agreed to make a submission to list Newco by June 30, 2011, and failing to do so, they would cause Newco to have a trade sale of their shares in the company.

Pursuant to EPF's commitment to subscribe 25 million redeemable convertible cumulative preference shares (RCCPS) credited as fully paid-up in Newco at RM1 each, Semua Group will be able to utilise the funds for the fleet expansion and to finance its working capital requirements whilst being able to phase out its single hull tankers.

Newco will thereafter be able to position itself for its intended regional expansion in anticipation of the increase in demand for the transportation of refined petroleum products.

"Barring any unforeseen circumstances, the proposed disposal is expected to be completed latest by fourth quarter of 2009," AmInvestment Bank said.


Wednesday, September 2, 2009

OSK Slashes Freight Management's Earnings Projection

OSK Research has revised downward its earnings projection for Freight Management Holdings Bhd (FMH) for financial years 2010 and 2011 by 10 to 16 per cent.

The research house said the revision is due to the fact that the high spread in earnings from sea freight is unlikely to be repeated this year, as market rates adjust to improving demand.

"While we expect the group to see positive growth for financial year 2010, we are concerned that the stellar margins achieved in financial year 2009 is unlikely to be repeated as market freight rates normalise on recovering demand.

"As such, we have scaled down our profitability assumptions, where the earnings estimation is slashed by 10 to 16 per cent," OSK said in its research note here, Wednesday.

Freight Management, an integrated logistics services provider, recorded revenue and earnings of RM229.4 million and RM11.14 million respectively, for the financial year ended June 2009.

"Despite the difficult period during which rates in the freight market shrank sharply by 60 to 70 per cent, Freight Management was able to fetch a higher profit spread in its sea freight business.

"This boosted its overall bottom-line margins amid a contracting revenue base in the second half, which sustained its double digit growth earnings by 11.5 per cent, year-on-year basis for the financial year 2009," OSK said.

The company is involved in provision of freight services, investment holding and the charter of barges and tugboats.

OSK forecast Freight Management to achieve a net profit of RM16 million for financial year 2011 against its forecast of RM14.4 million for financial year 2010.

It also forecast a revenue growth of 12.7 per cent to RM299.1 million for financial year 2011 from an estimated RM261.1 million for financial year 2010.

Source: Bernama

Management Of PKFZ Project Very Weak, Says PAC

The Public Accounts Committee (PAC) said it found the management of the Port Klang Free Zone (PKFZ) project to be very weak and many management practices for a project of this size were absent.

Its chairman, Datuk Seri Azmi Khalid, said PAC came to this conclusion after former PKFZ chairman, who was also the former chief executive officer of Port Klang Authority (PKA), Datin Paduka O.C.Phang, testified.

"It was obvious, the management of the project was very weak and many of the practices in the management of huge projects were not there.

"That's why the cost escalated drastically," he added.

The most obvious weakness, he said, was the absence of the projection of income and expenditure for the project.

"If there is no projection, it is like walking in the dark, and this is a project which rely on cash flow projection so that repayments can be made to the banks.

"So, if there is no projection of income and expenditure or cash flow, we will not know where the mistakes are," he added.

PKFZ, a transshipment hub built on a 405-hectare site in Port Klang, was embroiled in a controversy after it was revealed that the development cost had shot up from RM2.5 billion to RM 4.6 billion.

PKA had bought the land from Kuala Dimensi Sdn Bhd at RM25 per sq ft and later appointed the company to develop it.

Azmi said government representatives in the PKFZ board of directors were also found not to be representing the government as they were supposed to because a few of those who attended the board of directors meeting did so only to represent the secretary-general of their respective ministries.

"This means the government representatives also do not care and leave it to the management, and the management has weaknesses which will be mentioned in PAC's report," he added.

Azmi said although Phang cooperated with PAC during the hearing from 10am until 2.30pm, there were still some matters which had to be looked into deeply.

Asked who gave instructions to Phang in managing the PKFZ project, Azmi said they comprised the relevant authorities, like the Transport Ministry, Finance Ministry and inputs from certain individuals, including ministers.

He said Phang was also the general manager of the PKFZ project.

Azmi said PAC would release a report on the PKFZ scandal in October.

Source: Bernama