Is relocation of Penang Port the right call?

There has been more than one instance in the past decade, when the issue of relocating the Penang International Airport on Penang island to less "strategic" locations was raised.

And each time the matter was brought up by either politicians or businessmen, very strong reactions to the subject have followed, since it appears that not very strong cases have been put forward when arguments were made for the proposed relocation.

In the usual policy statement issues to test the waters, followed by a chain of statements from affected stakeholders arguing why the move should not take place, to letting the argument simply die a natural death, Penang residents can safely say "been there, seen it and done that".

Each time the matter of relocating or closing the international airport came up, it appeared that the economic sense to such a plan had not been fully evaluated, particularly the impact it would have on the manufacturing and tourism sectors, Penang's major revenue earners.

Fast forward to 2010 and all eyes are now trained on Malaysia's oldest port, Penang Port.

The announcement by Transport Minister Datuk Seri Ong Tee Keat last week that the 224-year-old port, which was set up by Captain Francis Light, may be moved to a more "suitable" location to cater to future expansion plans has raised some eyebrows.

Ong was quoted as saying that suggestions for this move came from port users. This statement was backed up by a representative of the freight forwarding industry in Penang by saying that "anywhere in the northern part of Malaysia should be acceptable".

No mention was made on whether all those involved in the running and using of the port have been consulted and whether all parties think this is a good move.

Also silent was the role which is supposed to be played by the port as the logistics centre of the Northern Corridor Economic Region.

It also did not appear as if the tourism sector has been consulted on the possible move to relocate the port, which in the past year, has seen increased activity in the form of multiple economic spinoffs to the state.

The question being asked now is: Is the move to relocate the port simply a knee-jerk reaction to some dissatisfaction by certain quarters over less than satisfactory services experienced at the port, or have some serious discussions, feasibility studies and alternative sites identified before this, before the statement was issued?

When Penang island lost its free-trade port status in the 60s, many residents of the island state, whose livelihoods depended solely on the port status had to "shift gears" and make rapid adjustments.

It was a very painful time for those who waited with bated breath and hoped that the policy would be reviewed.

This was prior to the revocation of the duty-free status, Penang had thrived on its barter trade with Medan and Singapore, while attracting a fair share of tourists and bargain shoppers.

The economic fortunes of the state took a turn for the better when Penang began enjoying the boon from domestic and foreign investments, earning itself the title "Silicon of the East".

Many of Penang's investors - which comprise some of the world's top multinational corporations - are still here today, because of the many facilities offered to them such as skilled labour and infrastructure like the airport and port.

Also to be considered is the fact that Penang's position as a preferred port of call for luxury cruise liners has only been restored this year with the opening of the RM62.9 million Swettenham Pier.

The busload of tourists being shuttled to eateries, hotels and other attractions on the island cannot be missed on days that the big ships drop anchor or berth at the port.

The issue of repeated dredging, which is needed at the port to accommodate all types of vessels, is one which should have been addressed and made provisions for a long time ago.

All hopes are now being placed on the federal government to follow through with Deputy Prime Minister Tan Sri Muhyddin Yassin's pledge in April for a financial allocation for a proposed dredging scheme of the Penang channel in the upcoming 10th Malaysia Plan.

The RM322 million project was shelved under the Ninth Malaysia Plan mid-term review.

Terminal operator Penang Port Sdn Bhd has been targeting to develop Penang Port into a premier port by 2012 if the deepening of the north channel proceeded.

It is hoped that the fortunes of the state can then come full circle in anchoring itself back on its waterways, which once helped boost its fortunes and fame.

Source: Business Times

Northport expects further volume increase

Northport (Malaysia) Bhd, which recorded a 26% jump in volume for the first quarter of this year against the same period last year, is positive of a further uptrend in its business.

For the first three months of this year, Northport’s volume hit 779, 867 twenty-foot equivalents (TEUs).

Northport managing director Datuk Basheer Hassan Abdul Kader said the port recorded a 30% growth in transhipment containers, which reflected a strong resurgence in regional economies.

“We are confident of a sustainable growth in container volume at Northport, based on a positive forecast of the country’s economy and also on recovery trends in the shipping market,” he said in a statement.

Basheer added that recent developments in the fleet deployment of shipping lines – which included restoration of suspended services, injection of additional ships and changes in their service strings – mirrored the renewed confidence in the shipping markets.

“Based on these demands, Northport aims to chart a cargo volume increase of between 10% and 15% for this year against that of last year.

“The positive forecast is also applicable to our non-containerised cargo business that recorded a 40% growth in the first quarter of this year compared with a year ago,” he said.

Source: StarBiz

MISC’s pre-tax profit down 40pc to RM933m

MISC Bhd announced a 40 per cent lower pre-tax profit of RM933.1 million for the financial year ended March 31, 2010 compared with a pre-tax profit of RM1.556 billion last year.

The reduction in profits was mainly due to higher losses in the liner and chemical businesses and reduced profits in the petroleum segment, MISC said in a statement today.

Revenue was at RM13.775 billion against a revenue of RM15.783 billion in the previous financial year.

MISC also said the rights issue exercise completed in February, with the issuance of 744.0 million new shares, has led to a drop in net tangible asset (NTA) per share from RM5.54 at the end of the previous financial year to RM5.17 as at March 31, 2010.

Meanwhile, the higher group cash balances from the rights issue proceeds have led to a reduction in net debt equity ratio to 0.2:1 during the year reviewed compared with 0.38:1 the previous year.

MISC has recommended a final dividend of 20 sen per share tax exempt.

The company said it expected better performance ahead with the containment of losses of its liner business.

Additionally, expansion of its heavy engineering business and its offshore business are expected to contribute positively to the group’s performance.

Source: Malaysian Insider

Sabah re-ignites cabotage policy row

The Federation of Sabah Manufacturers (FSM) wants Sabah to be made the hub port for the Far East, much like what Dubai is to the Middle East.

However, the FSM sees the National Cabotage Policy (NCP) as an impediment since this designates Port Klang as the National Load Centre at the expense of Sabah and the nation.

“Sabah has all the necessary ingredients to be the hub port for the Far East,” said FSM president Wong Khen Thau in pitching for the state.

“It is the centre of this region, within five to six hours flight to all major Asian capital cities."

Sabah is also central to the large populations of India, Indonesia and China besides being in the right location vis-à-vis Tokyo, Seoul and Sydney.”

Wong was lamenting the failure of the partial liberalisation of the NCP since May last year.

The failure has been attributed to the limited scope of the liberalisation, which only allows direct carriage of containerised trans-shipment cargo to Sabah and Sarawak by foreign vessels without the need for a domestic shipping licence.

Wong noted that Deputy International Trade and Industry Minister Jacob Dungau Sagan's admission in recent days that the liberalisation has had little impact is a good reason for doing away with the NCP.

Wong, taking up the cudgels again, pointed out that 70 percent of Malaysia's imports come from China, Japan, Korea and other countries that are in close proximity to Sabah.

This, he argued, gives Sabah an advantage over Port Klang as the natural hub for the country.

“Sabah can also present a better alternative and challenge to Singapore than Port Klang or Tanjung Pelepas in Johor,” he claimed.

He also said the state could make the quantum leap in per capita income if the hub port is located in Sabah.

The FSM has estimated a minimum US$15,000 in per capita income for Sabah by 2020, a huge improvement from the current US$3,000-4,000.

'Pump in funds'

FSM is calling for the federal government to pump in the necessary funds to build up the state's infrastructure in addition to dismantling the NCP.

“There would be a need to develop industries and promote revenue-oriented sectors such as tourism, education and aquaculture for Sabah to make a leap in its economic standing. A lot of money would be required from the federal government to increase such economic activities.”

The FSM sees Sabah bargaining for state-of-the-art industrial and other infrastructure as a better alternative to pressing for a bigger oil royalty, adding, “we have enough gas reserves which can feed the industries”.

For starters, said Wong, the federal government should set up petrochemical industries in the state while considering an upward review of the oil royalty, which has been frozen at 5 percent since the late 1970s.

Infrastructure improvements envisaged by the FSM include building up rail transport services and improving roads linking Kota Kinabalu to main regional towns along the east coast like Sandakan, Lahad Datu and Tawau. This will mean upgrading 9,825km of gravel roads to add to the 6,000km of sealed roads.

There is also a need to focus on courier services, sea transport services, shipping and forwarding agencies, cargo handling, stevedoring services and port services, bunkering services, water and power.

State Industrial Development Minister Raymond Tan is hopeful that the NCP will be done away with in the near future, but prefers to use the term “further liberalisation”.

“The state government is requesting the federal government to fully liberalise the Cabotage Policy. At the same time, we are undertaking a study on the high cost of logistics services in Sabah,” he said.

The liberalisation of the NCP, he said, is among the 'Strategic Changes Initiative' study being undertaken by his ministry.

“We need a freight equalisation scheme through affirmative action - read subsidies - to settle the high shipping cost in Sabah,” added Tan.

Sabah's moves are likely to invite flak from shippers based in Peninsular Malaysia who are dependent on carriage to Sabah and Sarawak.

In the past, these shippers have resisted any plan to do away with the NCP. This has led to the charge that the federal transport ministry is in the pockets of the shippers.

The higher cost of living in Sabah and Sarawak, compared to the peninsula, is also attributed to the NCP.

Source: Malaysiakini

Europe’s shipbuilders may break out of the doldrums before Asia’s

FOR those who regard the smashing of a champagne bottle as a tragic waste, the problems facing the world’s shipbuilders are excellent news. It takes such a long time to construct huge ocean-going container ships, bulk carriers and oil tankers that the vast shipyards of South Korea, China and Japan will still be cracking bottles of bubbly over newly launched ships for a couple of years yet. But once these vessels, ordered in the boom before the financial crisis, are in the water, the course ahead looks rocky. Oddly, Europe’s shipyards, although still storm-lashed after 30 years of low-cost competition from Asia, seem to face a slightly brighter horizon.

Fresh orders for the world’s shipyards are at a low ebb. Last year they were more than 80% lower than in 2007, when sky-high freight rates and cheery economic forecasts encouraged shipping companies to scramble for new vessels. The subsequent recession in the rich world sent shipping rates tumbling. A swift rebound is unlikely: despite more scrapping and some cancellations, hundreds of ships are poised to hit the oceans this year.

Asia’s shipyards, streamlined and efficient, concentrate on building large, standardised ships. These are the sort in greatest oversupply. South Korea’s shipyards won over half of global orders for new ships in the first quarter of 2010, but they were worth just $2.2 billion. In 2008 Korean yards won orders worth $32 billion. Hyundai Heavy Industries, one of four big Korean shipbuilders, has not won a single order for a ship since late 2008.

European shipbuilders are suffering from a dearth of new orders too. The Odense shipyard owned by A.P. Moller-Maersk, one of the world’s biggest shippers, has an illustrious history: it produced the world’s biggest container ship. But cheap Asian competition for this type of vessel has holed it below the waterline. It will close in 2012.

Europe’s shipmakers are turning to national governments and the European Union for help, claiming that their industry is close to collapse. In early April representatives from nine EU countries called for an emergency programme to support the industry. Shipyards want help in gaining access to credit lines and soft loans, as well as rules to promote greener ships. This would support them until shipping finance recovers and hesitant customers regain faith in the world economy.

Yet the restructuring forced by low-cost Asian competitors has left Europe’s shipyards with some advantages. Their revenues of €30 billion-40 billion ($40 billion-53 billion) a year come mainly from niche markets which are not suffering from as much overcapacity as the mainstream.

Cruise ships are a particular speciality, and the market is growing. Four orders have been placed with European yards this year, compared with one in 2009. Ferries, another area of European dominance, are also in demand, and ageing ferry fleets in the Mediterranean are due for replacement soon. The offshore wind farms sprouting around the continent provide another opportunity. Europe’s shipmakers are adept at designing cable-laying ships and other service vessels. And as oil firms are forced to drill in ever deeper waters, ships suited to the task of towing and maintaining new rigs will be needed.

Pressure to make ships greener will also favour European shipyards. The International Maritime Organisation is discussing regulations that may force ships to belch out less carbon dioxide, and has introduced tighter limits on other pollutants. Europe leads in this type of technology, too. European shipmakers will also benefit from plans to encourage greater use of the continent’s inland waterways to ship goods instead of hauling them by road. If they can weather the current storm, Europe’s shipyards may yet resound again to the smashing of bottles.

Source: Economist

Twists and turns at Malaysian Merchant Marine Bhd

SHIPPING company Malaysian Merchant Marine Bhd (MMM) came to life in 1993, and was first introduced to the investing public when it was listed on the second board of the Kuala Lumpur Stock Exchange in 1997.

The company was doing fairly well, and during the oil and gas boom in 2003, MMM was the darling of Bursa Malaysia, with many analysts forecasting stellar earnings from the company’s expansion plans.

Things however took a turn for the worse about a year later when the company’s long-term charter strategy caused it to miss out on the bull run in shipping rates. Long dry-docking costs also ate into margins.

Datuk Ramesh Rajaratnam ... ‘the choice is to jump ship now or sink with it

In came Datuk Ramesh Rajaratnam as a substantial shareholder of MMM in December 2007, after he acquired 28.7%, or 50.4 million shares, and 470,000 Islamic preference shares from MMM’s substantial shareholder, oil and gas outfit M3nergy Bhd for some RM33.5mil.

M3nergy today still holds 20.9 million shares, or 11.9% of MMM.

Ramesh’s emergence in MMM as deputy executive chairman came with bold plans.

He had said in past interviews that he wanted to emulate Datuk Tony Fernandes, achieving in the shipping industry what Fernandes has done with AirAsia Bhd.

It’s now been two years, and it appears that those plans are nothing but pipe dreams. The company is today a financially distressed company, having fallen into the Practice Note 17 category in March this year.

For the nine months ended December last year, MMM’s net loss widened to RM17.3mil from RM4.5mil a year earlier on the back of RM29.7mil in revenue against RM76mil previously.

Malaysian Rating Agency Bhd (MARC) has been continuously downgrading MMM’s bonds from its A rating since Dec 19, 2009.

On April 2, MARC downgraded its rating on MMM’s RM120mil Al Bai’ Bithaman Ajil Islamic Debt Securities (BaIDS) to a D rating from a C rating.

This was due to MMM’s failure to meet a repayment of the BaIDS on March 29. MMM announced its default in payment on March 30.

What went wrong?

When Ramesh came in December 2007, MMM had a number of sea going vessels and although it had a very heavy debt position, it also had a strong cash balance.

Ramesh came in and streamlined the group’s operations by disposing non-core businesses and vessels that were either too old or those that appeared not to fit into its strategy “I attempted to go for a capital reduction exercise to clean up our balance sheet but that was voted down by the shareholders,” he said.

For a while, these strategies appeared to work and for the financial period ended 31 March 2009, MMM had returned to the black after several years of significant losses.

Then came the crash of the shipping sector in 2008. The Baltic Dry Index fell from about 12,000 points in late 2007 to about 700 points by May 2008. Suddenly, the demand for vessels worldwide dried up and the charter rates began to fall alarmingly.

That year, the company also sold its Mauritius-based charter brokering business MMM Ventures Ltd for US$4mil (RM13.25mil).

“Our vessels that were fully employed at about US$5,000 a day, were suddenly having off-hire days. When a vessel is off hire, the daily running cost of about US$3,500 was still being incurred. That’s RM10,000 per day per vessel,” he explained.

MMM’s single hull vessels that it had earmarked for sale were suddenly no longer in demand as similar capacity double-hull tankers were being offered at lower prices by many distressed sellers.

“It was not unusual to hear of vessels that were newly built at a cost of say, US$20mil, that were being sold off by the building yards at US$10mil to recover cash,” he said.

At that time, Ramesh’s strategy was to sell off its ageing fleet (vessels that were above 15 years) and with the monies raised, to buy a newer fleet.

However, with the world recession, MMM had no buyers for the old vessels and no funders for the new vessels. Hence, MMM chose to cancel or renege on those new buildings and suffer the deposit loss, which was a fraction of the real loss in write down value.

Said Ramesh: “When MARC downgraded us from A- to BB, all our funding efforts were severely scuppered. A local bank that had offered us US$ 77mil in funding for new vessels ordered, retracted that offer at the last minute. That was a period when the funding market worldwide was just too spooked to move,”

Ramesh said that MMM’s vessel suppliers were becoming more restrained in their credit policy and all these factors. Some of MMM’s customers also defaulted on their payments as they too were faced with similar challenges.

“This becames a time when ship-owners who had deep pockets could last out the storm. The smaller ones, had to consider abandoning ship or sink with it. MMM was not an exception to these challenges. In my capacity as an interested party, I was selling my shares and assets to finance the company through these tough times. At some point, I had to stop doing this,” he said.

Ramesh said he has been funding the company until a week ago, when he finally stopped.

“It is disappointing but as I’ve said earlier, the choice is to jump ship now or sink with it. Difficult choices are being made daily now,” he said.

Mistakes made

Currently, the only revenue generating asset of the company is the MMM Ashton, a double-hull vessel which is currently deployed under a bareboat charter contract.

MMM Ashton is targeted for disposal by May 2010 in order to meet MMM’s debt commitment. The net realisable value of the vessel, initially estimated at around US$11mil has now been revalued to US$5mil for the final RM24mil payment in BaIDS.

MMM has total debt obligations of some RM64mil.

The company’s other two ships are MMM Kingston and MMM Dayton, which have been put up for sale and have been written down to a cost of some US$50,000.

There have been various criticism on the company’s moves.

Questions have been raised as to why the profitable MMM Ventures was sold for only US$4mil, when its three vessels were being chartered out for some US13,000 per day.

There are also rumblings that all the ambitious plans were mere talk. While there were plans to acquire new vessels, none actually went through.

“MMM entered into a contract to buy a ship for US$40mil in December 2008. That never happened and MMM lost its deposit of US$4mil,” said an observer.

Furthermore, for the quarter of March 31, 2009, when MMM turned back to the black, there were no comparative figures available. This was because the group had changed its financial year from Aug 31 to March 31. The financial period was from Sept 1, 2007 to March 31, 2009, which was a 19 month period. Thus there were no applicable figures.

The observer added that he found it hard to believe that the two vessels, MMM Dayton and MMM Kingston had been written down to US$50,000. “Based on its weightage and specifications, it should be worth US$400,000 and US$600,000 respectively.”

Source: StarBiz

Northport sees 26pc Q1 container growth

NORTHPORT (Malaysia) Bhd, the country's largest multi-purpose port operator, has posted a 26 per cent growth in the volume of containers handled in the first three months this year.

Containers handled rose to 779,867 TEUs (twenty-foot equivalent units) for the first three months compared with 620,633 TEUs in the same period last year.

The increase in the volume of containers handled was one of the strongest in recent years and exceeded all expectations considering that the container traffic fell marginally by two per cent last year on account of the global economic slowdown, Northport said in a statement today.

Based on the demand-side developments, cargo volumes at Northport could increase between 10 and 15 per cent in 2010 compared with the volume of containers handled in 2009, said managing director Datuk Basheer Hassan Abdul Kader.

The port recorded strong revival in trade as the handling of export and import containers rose impressively, suggesting robust recovery of the national economy after it contracted by 1.9 per cent last year.

In line with the improving economic and trading environment and boosted by the growth of the country''s manufacturing sector, container exports via Northport rose by 25 per cent to 223,450 TEUs while imports rose by 21 per cent totalling 231,450 TEUs during the January-March period this year.

"It was particularly gratifying to note that we recorded very high growth in the volume of transshipment containers, which rose by a substantial 30 per from 250,782 TEUs to 324,899 TEUs, reflecting a strong resurgence in the growth of regional economies," said Basheer.

He said while Northport has been largely a major sea outlet handling the national trade and its growth largely reflecting the intensity of the economic activities in the immediate catchment areas, the surge in transshipment volume was noteworthy as it served to strengthen the confidence of global shipping lines.

"We are handling more than 120 shipping lines, including a good spread of feeder network linking Northport with more than 250 ports worldwide and this has added the attraction of Northport as a transshipment hub to shipping lines," he said.

Basheer said the increase in transshipment was a positive reflection on the port's high level of service to discerning global shipping lines to win more transshipment, notwithstanding the fact that transshipment traffic has become very competitive in the regional as well as the national port systems.

"We offer a very competitive level of service based on high productivity, consistency and efficiency because we are very focused on optimising on asset utilisation which gives us the edge and the shipping lines good value for money," he said.

"We are confident that the growth in container volumes at Northport will be sustained especially on account of the positive prognosis and forecast on the performance of the Malaysian economy and also based on recent trends in the recovery of the shipping markets," he added.

Source: Business Times

Council to coordinate management of country's ports to be formed

The Government has agreed to set up the National Port Council to coordinate the management of ports nationwide.

Transport Minister Datuk Seri Ong Tee Keat said further details on the matter would be announced later and that the setting up of the council, to be chaired by him, would not jeopardise the functions of existing port authorities.

"The cabinet and the National Economic Council have approved the formation of the National Port Council to coordinate matters pertaining to management of ports to further promote them at international level to attract more clients," he added.

Ong was speaking to reporters after the award-giving ceremony for excellent achievements in the world standings of top container ports of the world near here Thursday.

At the function, the country's two leading ports, Port Klang and the Port of Tanjung Pelepas (PTP) were honoured for being in the list of the world's best 20 ports last year.

Port Klang was ranked 14th, from 15th in 2008, while PTP moved up to 17th last year, from 18th the previous year.

Source: The Star

Northport Expects Cargo Volume To Increase 10-15 Per Cent

NCB Holdings Bhd's direct subsidiary, Northport (Malaysia) Bhd, is expected to register an increased cargo volume of between 10 per cent and 15 per cent this year.

Northport Managing Director and Chief Executive Officer, Datuk Basheer Hassan said the company sees an increase in both the container and cargo business segments amid an improving economy.

"Northport registered a total volume of 2.858 million TEUs in 2009, a decrease of five per cent compared to 3.006 million previously," Basheer told reporters after NCB Holdings' annual general meeting (AGM), here Monday.

He said the container mix at Northport stood at 50 per cent for both import and export containers.

Transshipment containers made up 38.6 per cent of the total volumed handled by Northport.

Under the conventional cargo business, Northport handled a combined volume of 6.53 million freight weight tonnes (FWT) last year.

Meanwhile, NCB Holdings Group's chairman, Tun Ahmad Sarji Abdul Hamid said Northport continued to be the leading gateway for indigenous trade, handling 58.6 per cent of the country's import and export volume passing through Port Klang.

He said the total volume of containers under all classes handled through Port Klang during 2009 was 7,309,779 TEUs, reflecting a decline of 8.3 per cent compared with 7,973,579 TEUs recorded in 2008.

On the planned construction of Wharf 8A, Ahmad Sarji said the group remained ready to re-activate the plan.

It would be to meet its customers' demand for enhanced capacity to service their growth in business.

"Given the current growth, we are quite optimistic that we need to expand the capacity. This was held back in 2009 in the last quarter because of economic downturn."

With the indication of growth now, it would be sustainable to invest, said Basheer.

He said Northport will call for tender in one or two weeks for building of the wharf.

The size of the wharf will be 300 meters in length and 17 meters in depth.

This will allow ships to berth at any one time there, he added.

-- BERNAMA

Century Logistics charts growth strategy

Century Logistics Holdings Bhd (7117), a supply chain management and logistics provider, is reviewing its business model in Thailand, after charting some RM2 million in losses there.

"We want to go slow in Thailand and not put too much hope there. The risk is too big," its managing director Steven Teow Choo Hing told Business Times in an interview.

The group has invested some RM35 million in the country since 2004.

Last year, the group through its subsidiary, Century Logistics Sdn Bhd, completed a RM30 million warehouse-cum-distribution centre in Rojana Industrial Area, 70km off Bangkok.

The initial plan was for the facility to cater to multinational corporations (MNCs) with operations in the vicinity.

Besides Thailand, the group also has a presence in China and India.

While Vietnam was another target market for expansion for its total logistics and supply chain management division, Teow said the group has held off its plans to enter the market in view of the inflationary issues there.

In China, the group is head hunting for a country manager to lead its operations there.

"We want to focus on growth areas that are heavily populated like Shanghai and Beijing," he said.

In India, Century Logistics provides contract logistics services to the MNCs in Chennai and Bangalore.

Teow said, however, the business in India is challenging because of the different duty structures that each state applies.

On its procurement and assembly services, Teow said the company is also looking at replicating its assembly unit success with Syria in Ghana, Africa.

He also said there are plans to expand its oil and gas division to include ancillary logistics operations.

Currently Century Logistics offers only bunker supply services.

Overseas operations contribute about 10 per cent to the group's revenue.

Century Logistics registered a net profit of RM20.9 million on revenue of RM210.9 million for the financial year ended December 31 2009.

Source: Business Times

Maersk aims to sail into 'modest' profit

COPENHAGEN: Danish shipping and oil group AP Moller-Maersk said it would return to a "modest" profit in 2010 after weak global trade knocked freight rates and dragged it to a deeper loss than expected for 2009.

Chief executive Nils Smedegaard Andersen said the container shipping business would remain in the red this year though other operations - from oil and gas to offshore services, port terminals and supermarkets - would continue to perform well.

"We hope that 2009 will be an exception," Andersen said. "Priority No. 1 is to return to profit. We are not guaranteeing that we will be back in the black in 2010, but at the moment it is our strong ambition and expectation to deliver a profit this year.

"We do not expect the container line to be back in profits in 2010," he said. "Rates have improved but they are still not at a level where they can give acceptable profitability."

Net losses at the company, which owns the world's biggest container shipping company, Maersk Line, amounted to 5.49 billion Danish crowns, or US$1.01 billion (US$1 = RM3.37), in 2009 after a profit of 17.53 billion in 2008.

The result was weaker than the average estimate of a net loss of 5.11 billion crowns in a Reuters poll of 13 analysts, whose estimates ranged from losses of 1.56 billion to 7.37 billion crowns.

The result was in line with the company's own guidance for a loss of around US$1 billion.

"The main factors driving (results) down of course were low rates in containers and in tankers as well as a significant drop in the oil price - these were really the negatives of last year," Andersen said.

Despite the loss, Andersen said that the group could be satisfied with its achievement of reducing costs by about US$2 billion in 2009 which left it with cashflow from operations of US$4.7 billion, which he called "pretty strong".

Maersk would continue to focus on costs and efficiency this year, though the cost-reduction effect would be lower than in 2009, he said.

Shipping markets were hit hard last year by the global economic downturn, which reduced freight volumes and rates.

Freight rates for the group's container activities were 28 per cent lower than in 2008, Maersk said in a statement.

Andersen said that the most negative effect in 2009 came from the shipping industry's "willingness and capacity to take rates down below cash operating levels".

Looking ahead to the current year, the company said: "Overall, the AP Moller-Maersk Group is expected to post a modest profit. Cash flow from operating activities is expected to be well above the 2009 level."

Asked to quantify "modest", Andersen said:

"We are talking black but probably small numbers.

"The 2010 guidance is very disappointing, with management expecting a modest positive result," Jyske Bank said in a note, comparing that with market consensus of a 2010 profit of 9.1 billion crowns.

The container shipping division incurred an operating loss of 10.06 billion crowns, while Maersk's oil and gas business made an operating profit of 25.33 billion crowns.

The container shipping loss was bigger than analysts' average forecast of a loss of 9.22 billion crowns, and the oil and gas profit below their average estimate of 26.11 billion in the Reuters poll. -

Source: Business Times

Tg Agas industrial park infrastructure on track

INFRASTRUCTURE works for the RM8 billion Tanjong Agas Oil & Gas and Logistics Industrial Park in Pekan, Pahang, is expected to be completed by 2012.

Tanjong Agas Supply Base & Marine Services Sdn Bhd (TASBMS) managing director Mohd Faidzal Ahmad Mahidin said it is completing the road access, groundworks and necessary infrastructure to enable companies to move in soon.

"We expect to see companies moving in and constructing manufacturing facilities at their respective plots of land by the middle of this year," he told Business Times in Kuala Lumpur last week.

At least 200 companies are expected to support operations at the industrial park's shipyard.

Mohd Faidzal said TASBMS has also secured the support of several players, both foreign and local, to operate at the industrial park.

"We expect to see more companies coming on board soon," he said, noting that the project will be hastened and its economic impact felt within the year.

It was reported previously that among the companies that planned to invest in the industrial park include Core Competence Sdn Bhd, Competent Selection Sdn Bhd, Vantech Dockyard (M) Sdn Bhd, Tec-Steel Manufacturing Sdn Bhd, Usatech Marine (M) Sdn Bhd, Bitari Abadi Sdn Bhd and Damini Corp Sdn Bhd, with total investments worth RM6 billion.

Facilities to be available at the 1,699.68ha Tanjong Agas Oil & Gas and Logistics Industrial Park include a shipyard, fabrication yard, dredger yard, bulk terminal, petroleum terminal and warehouses, factories and commercial and residential development.

"Besides land for the industrial park, we have allocated 607ha for commercial which will house among others headquarters of respective companies operating in the industrial park and other supporting companies," Mohd Faidzal said.

The area is being developed concurrently with the industrial park.

Upon completion, the Tanjong Agas industrial park will be a modern one-stop service centre and offshore base and is expected to create over 30,000 jobs within 10 years with the first 5,000 jobs to be generated within the first three years of operation.

Pahang state government's investment arm, Perbadanan Kemajuan Negeri Pahang, holds a 30 per cent stake in the industrial park, and the rest by TASBMS.

Source: Business Times

Trade eyes alternate routes, oil buffers over Malacca risk

Oil traders are concerned about supply disruptions via the Malacca Strait after the Singapore Navy warned of possible attacks on tankers, but said alternate routes could be used that add slightly to costs while stocks on landed and floating storages offer ample buffer.

However, they cautioned that the more than 30 tankers crowding the waters off Singapore, Malaysia and Indonesia used as storage tanks for distillates, fuel oil and crude could also be targets.

Malaysia and Indonesia are bolstering security in the Strait of Malacca, through which flows at least 15 million barrels of oil each day, while Singapore also raised alert levels and beefed up security at its airport and new casino resorts after the navy’s warning.

“Of course, we are concerned. But there’s nothing more that we can do on our part as the cargo owners to prevent this from happening,” a senior Singapore-based Asian trader said today.

“The alternatives are easy enough. The diversion around Indonesia adds two to three days to sailing time and costs a little bit more, but that’s OK.”

The trader said in the event of an attack on a tanker, the loss of a single cargo might be a problem for the owner, “but it’s an opportunity for everyone else to sell at higher prices”.

If the strait was blocked after an attack, tankers could sail further south along the western coast of Indonesia’s Sumatra via the Sunda Strait and head north to Singapore, adding two to three days of sailing time. Ships moving to North Asia could sail towards East Java via the Lombok Strait or Banda Strait.

For example, this would add US$20,000-US$30,000 (RM68,000-RM102,000) per day to the cost of carrying diesel or kerosene on an 80,000-tonne tanker.

Traders said the loss of a single cargo, even if it was on board a Very Large Crude Carrier (VLCC), would have minimal impact on the market’s demand-supply dynamics because for distillates alone, some 14 million barrels were being stored on tankers in international waters around Southeast Asia.

“It could be disruptive to oil trades, but it would be not catastrophic,” said David Kirsch, PFC Energy’s Director of Market Intelligence Service.

“It would also raise insurance rates, but typically the price of oil rises in conjunction with these insurance rates, so the impact is on the consumers, not the transit trade.”

Shipping and industry groups have advised shippers to take extra care when passing through the Malacca Strait and have increased vigilance on their vessels.

Traders also said there were about 4 million to 5 million tonnes of fuel oil and crude on board converted VLCCs anchored off Malaysia’s southern ports of Tanjong Pelepas and Pasir Gudang.

While these provide a comfortable cushion to the market if an attack triggers serious disruptions, they also face risks.

“They are as vulnerable as any tanker sailing along the Strait. But maybe less of a risk, because they are in closer proximity with each other and help can be rendered more readily,” said a trader, who has cargoes on floating storages.

“Also, it’s probably less dangerous because fuel oil and distillates are less flammable. But I don’t think these crazy guys are going to have the intelligence to check what’s on board before they decide to go after a ship.”

Carl Larry, president of Oil Outlooks and Opinions LLC said a global market struggling with oversupply would view disruptions such as a closing of the Malacca Strait or the refinery damage in Chile as supportive factors.

“As with Chile, the refined products that are in great oversupply are already water-borne and easy enough to move around the Strait,” he said, pointing to recent moves to send diesel to the quake-hit Latin American country, which have sent gas oil cracks to 11-month highs near US$10 a barrel.

“I think there is the shock and hype factor about the delay for ships to get through, but the supply that so many are desperately looking to move gets a chance to ease.”

Still, most traders welcomed the heightened security in the Strait, which has been plagued by piracy, adding that this would help deter attacks and ease their worries.

“I would expect the Strait to be very heavily patrolled, and the likelihood of any attack materialising is quite low — you have all that security on standby to prevent it from happening,” said a distillates trader with a European firm.

Source: Malaysian Insider

Terror threat in Malacca, Singapore Straits

Authorities have said that a terrorist group may be planning attacks on ships in the Straits of Malacca and the Singapore Straits.

International Maritime Bureau piracy reporting centre head of Asian region Noel Chung said the organisation was alerted by a foreign agency to this threat and has passed on the alert to the relevant regional authorities in Malaysia, Singapore and Indonesia.

He said that while threats of piracy were common in both straits, a terror threat against ships was new to the waters.

“This alert was not issued by us, so we cannot tell you what level or how serious the threat is,” he told The Star.

Chung advised ships plying both straits to be extra vigilant and conduct radar lookouts.

“Usually, ships keep a lookout after dark to thwart pirate attacks. We are advising them to keep a 24-hour watch,” he said.

International news agency AFP reported that an unidentified terrorist group is planning attacks against oil tankers in the Malacca Straits, one of the world’s busiest shipping lanes, quoting the Singapore Navy and a shipping association on Thursday.

The Singapore Shipping Association said it had received an advisory from the Singapore Navy Information Fusion Centre about “an indication that a terrorist group is planning attacks on oil tankers in the Malacca Straits.”

It said “this does not preclude possible attacks on other large vessels with dangerous cargo.”

“The terrorists’ intent is probably to achieve widespread publicity and showcase that it remains a viable group,” the Singapore Navy said in its advisory.

It reminded shipping operators that the militants could use smaller vessels such as dinghies and speedboats to attack oil tankers and urged them to take precautions.

Pirates and robbers have also used small fishing vessels to board ships during previous attacks in the Malacca Straits, it noted.

Security analysts have said that the Malacca Straits, bordered by Singapore, Malaysia and Indonesia, is a prime target because more than 30% of global trade and half the world’s oil shipments pass through the narrow waterway.

“If the Singapore Navy is providing this information, it should be taken very seriously,” said John Harrison, a maritime security expert at the S. Rajaratnam School of International Studies in Singapore.

He said that on the threat level scale, an “indication” is lower than a “warning”, but precautions should still be taken.

A “warning” refers to a credible threat that an attack is likely to be carried out against a target over a specific time frame, while an “indication” is gathered from a series of suspicious activities in a certain area.

“Certainly, we do know that there has been a long-term concern about terrorism in the Malacca Straits but the threat level remains fairly low,” Harrison told AFP.

“That said, it was very prudent for the Singapore Navy to pass this warning along because it keeps the threat level where it is.”

While the Singapore Navy did not name any group, Harrison said the South-East Asia-based Jemaah Islamiyah (JI) militant group or al-Qaeda itself could not be ruled out.

“JI could certainly be one of the groups. We have not seen any public evidence indicating they have the capability to operate but that does not mean they are not developing them,” he said.

In its advisory, the Singapore Navy recommended that ships should “strengthen their onboard security measures and to adopt community reporting to increase awareness and strengthen the safety of all seafarers,” according to the shipping association.

Singapore, one of Asia’s most affluent cities and a regional base for thousands of multinational companies, is a prime target for attacks by militant groups, officials have said.

One of the plots foiled by Singapore authorities was a plan by Islamic militants to hijack an airliner in Bangkok and crash it into Changi airport in 2001 following the September 11 attacks that year in the United States.

Singapore has also arrested several militants involved in a plot to bomb the US embassy and other targets in the city-state.

Source: The Star