Friday, January 28, 2011

Economic woes in US, Europe still cast shadow on local shipping sector

Despite the rosy outlook of seaborne container trade anticipated this year in continuation of last year’s growth, there are several negative variables that could still cloud the positive sentiment.
Maritime Institute of Malaysia senior fellow Nazery Khalid said Malaysia, being a trade-dependent country, would be subjected to the economic performance of countries it traded with and the economic woes of the United States – a key trade partner – were not likely to improve soon.
“The eurozone crisis might add to the gloom; already Portugal is feeling the contagion effect of a crisis that has hit Ireland and Greece.
Naery Khalid says the US economic woes are not likely to improve soon.
“And China’s effort to ease economic growth to prevent overheating could also have an adverse effect to Malaysia’s trade and ports’ performance in the near term,” he toldStarBiz.
According to Nazery, the World Bank projected that China’s economy would grow at an average of 8.4% over 2011-2015 and 7% over 2016 to 2020, compared with the double-digit average annual growth it registered in the past decade.
“Other quantitative easing measures by several major trading countries may also dampen a sharp rebound in global economic and trade growth, and this will obviously have a telling effect on Malaysia,” he said.
Although Malaysia’s economy emerged largely unscathed from the global recession, Nazery said recently-released domestic figures suggested that the country was not entirely immune to the devastating effects of the downturn.
Malaysia’s exports in October 2010 slumped to an 11-month low, with a mere 1.3% growth recorded year-on-year, despite the economy posting a strong growth of 8.1% in the first three quarters of 2010.
“Also, the specter of huge new tonnage coming into shipping trades such as container and bulk will add downward pressure to freight rates.
“It would be unlikely that these vessels would be able to find demand for such cargos to be able to match the supply of the vessels carrying them,” he said.
To recap, Minister of Transport, Datuk Seri Chong Kong Ha recently announced that that Malaysian ports handled a total of 18.4 million 20-foot equivalent units (TEUs) last year.
This commendable figure was a 14.8% increase from the 16.04 million TEUs of total container throughput recorded by local ports in 2009.
The minister has forecast a 7% year-on-year growth in total throughput in 2011.
Nazery said the confidence of a productive year for local ports this year was not misplaced as economic indicators pointed to decent growth for Malaysia’s trade and economy this year, in line with improving global economic sentiment.
World Trade Organization projected global trade to grow 13.5% this year, compared with its earlier growth forecast of 10%.
Meanwhile, Bloomberg recently reported that Asian exports that helped power the world recovery last year were poised to grow more slowly as the region’s manufacturing rebound eases and the US unemployment restrains consumption after a post-recession spending spree.
According to the newswire, Container traffic growth in Shanghai, Singapore and Hong Kong, the world’s busiest ports, has cooled since the first half of last year.
Singapore exports in 2011 may rise at a third of last year’s pace of as much as 24%, according to DBS Group Holdings Ltd. The island’s government joins Taiwan and South Korea in predicting smaller gains in overseas sales.
While seaborne container trade outlook is still on cautious mode, shipping companies that were severely battered when freight rates plunged during the height of the global economic crisis, were slowly “restoring” their rates in tandem with the increase demand for their services.
Maersk, the largest container shipping company globally, had on Dec 22 announced general rate increase for its Middle East- Europe service for the first quarter of this year.
CMA CGM in its revenue restoration programme has also embarked on new rate restoration and surcharges for a few of it services this month.

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