More investments needed

Logistics sector should be able to meet expected increase in demand

SHAH ALAM: The logistics sector must further invest in technology, capacity and talent to offer more value-added services in line with the uptrend in trade volume.

SME Corp Malaysia chairman Datuk Dr Mohamed Al Amin Abdul Majid said the logistics sector capacity should meet the expected increase in demand in view of the growth of the global economy.

Datuk Dr Mohamed Al Amin

“This is the time where the logistics sector must take advantage because as trade grows, the services offered by the logistics sector are much needed to ensure seamless transportation, storing and distribution of goods.

“For Malaysia, the main challenges are to further improve the services offered towards total logistics services and multi-modal transportation.

“To date, there are about 31,168 companies involved in the logistics sector in the country with 30,766 belonging to the small and medium-size entreprises (SMEs) category,” he said in his speech to officiate the Bumiputra Logistics Entrepreneurs Association AGM last week.

Mohamed Al Amin said as the logistics sector remained as one of the strong pillars of the country’s trade growth and competitiveness while the Government had acted as an “enabler” via its support and various incentives.

The private sector specifically the transportation, storage, and communication industry contributed about 8% to the country’s gross national product last year.

“This year, there are about 219 programmes with financial commitment of RM5.9bil to be implemented via various ministries and agencies.

“For SME Corp, we have launched two programmes early this year namely Business Accelerator and Enrichment & Enhancement Programme to support the SME industry and players.

“PPLB members who are interested in this programme are welcome to join and application can be made online.

“We have also collaborated with a prominent logistics player, Kontena Nasional Bhd, to widen the scope of the logistics sector market via talks, site visits and business-to-business sessions,” he said.

Source: BizStar

In anti-trust law we trust

COMMENT

By NAZERY KHALID

IT was reported recently that the big boys in the container shipping industry were among the companies that were raided by the European Union (EU) anti-trust officials over a possible collusion. This has sparked an interest to re-visit the subject of EU anti-trust law in the liner shipping industry, which was implemented in October 2008.

Last week, Bloomberg reported that AP Moller-Maersk A/S, CMA CGM SA and Hapag-Lloyd AG were among companies raided by EU anti-trust officials. The companies were reported to give full cooperation to the officials to carry out the probe.

EU regulators said they had “reason to believe” that the companies might have breached EU cartel or monopoly-abuse rules. The raid doesn’t mean that the companies are guilty of anti-competitive behaviour, according to the European Commission.

The raid came in the midst of investigation into how container shipping freight rates rose in 2009, although demand dropped sharply amid the global recession and industry capacity swelled owing to delivery of huge new tonnage in the box trade.

Since the implementation of the anti-trust law, liner shipping companies have lost their privileged status under EU competition law with the withdrawal of the liner conference block exemption, which authorised horizontal price-fixing and similar agreements.

In areas where the liner consortia block exemption does not apply, all cooperative arrangements are carefully and individually vetted under the competition provisions of the European Council Treaty.

The competition regime, while lauded by importers and exporters, in the EU liner shipping context is not without problems, though.

Several legal questions have been raised over the introduction of the competition law in EU, in areas such as cooperation between liner shipping companies and the benefit of cooperative arrangement between liner shipping companies over the negative impact on competition. The strategies of these companies that may lead to an abuse of a dominant position have also been put under scrutiny.

Liner shipping companies have had to reconfigure their discussion agreements and business strategies to accommodate the abolishment of the block exemption so generously accorded to them before the enactment of the EU competition law.

This has led to greater competition among them in the EU trade, which is lauded by shippers.

It was reported that Hong Kong’s OOCL, a powerful player in the liner shipping trade, cautioned against implementing anti-trust laws that prevent shipping lines from developing solutions and rationalisation exercises to deal with capacity overhang. While stopping short at endorsing price-fixing conferences, OOCL lamented that anti-trust laws have restricted liner companies from collectively discussing issues affecting the liner trade.

That coming from the world’s 11th largest container shipping operator (based on 2010 ranking) is noteworthy. OOCL’s grouse echoes that of many other liner companies which fear that the onslaught of open competition will adversely affect their business.

This anxiety is echoed by the recent recommendation of Singapore Competition Commission for the Singapore government to extend the block exemption to allow liner conferences to continue their trade until December 2015, with minor changes. This was made on grounds that anti-trust exemptions remain the norm for the global liner trade and most of Singapore’s trading partners.

Also getting into the act are Australia and Japan, which are also looking to apply competition rules on liner shipping.

To this end, the recent announcement by the Joint Global Shippers Forum (JGSF) to promote anti-trust laws in Asia should make governments sit up and take note. Countries, especially trade dependent ones, which ignore the call by this powerful forum do so at their own peril and run the risk of being bypassed by shippers.

Best business behaviour

With the Competition Act slated for enforcement in Malaysia on Jan 1, 2012, companies in the maritime sector are expected to make a major leap forward in their business conduct and be at their “best business behaviours.”

Operating in a borderless theater and ultra-competitive environment, the local maritime sector, which facilitates 95% of the nation’s trade, is expected to take the front in realising the targets of the Act, in line with the aspiration to make Malaysia a regional shipping and logistics hub and a globally competitive maritime nation. Being an open but small economy, Malaysia must put in place an institutional framework that will not only lure investors and businesses but also to align local companies with international best practices to enable them to compete globally.

Even skeptics of anything good introduced by the Government would be hard-pressed to argue against the virtues of the Competition Act.

However, those who will be affected by the Act need to keep to the letter and the spirit of the Act, which must be strictly enforced without fear or favour, to ensure its optimal effectiveness and the attainment of its objectives.

The dynamism generated in the marketplace by the injection of greater competition and innovation through the Act can only be good for a country that is racing against time to become a fully developed nation by 2020. Sharp focus will be trained on the maritime sector to help fulfill this lofty ambition.

● Nazery Khalid is a senior fellow at Maritime Institute of Malaysia.

Source: BizStar

Haulage charges set to go up

The Association of Malaysian Hauliers (AMH) will raise its haulage tariff guidelines by 20 per cent, effective June 1.

The AMH Tariff Guideline is used in the market by both customers and hauliers as a benchmark to negotiate rates.

The final negotiated rates differ customer to customer, depending on the services required, volume of businesses, destinations and other operational factors unique to each customer and their preferred haulier.

In a statement, AMH president Datuk Ahmad Shalimin Ahmad Shaffie blamed the rise on escalating operating costs and operational inefficiencies.

"Shortage of drivers, higher wages, increased costs for spare parts and tyres are some examples of factors driving up operating costs.

"Customers' demand for better services has also resulted in record-high investment in Information Technology as well as Glo-bal Positioning System (GPS)," he said 

The statement said that long delays at container depots have badly affected the productivity of haulage operators.

The current productivity rate is estimated to average two to 2.5 trips per day compared to the previous three to five trips per day for each truck.

The association estimates that each truck wastes up to RM20 per trip due to these delays, not to mention the loss in productivity and foregone revenues.

There are more than 200 container haulage operators in the country.

AMH also announced that the collection of trailer detention charges will be outsourced toan external third party come June 1.

"The constant monitoring of trailers and collection of detention charges from customers are tedious and costly, which sometimes lead to contentious arguments with customers." 

"As such, members of AMH collectively agreed to outsource the monitoring and collection task to a third party agent so that they may focus on their core competency of transportation," Shalimin said.

Source: Business Times

Hauliers association says sector needs to improve

Cost hikes, inefficiencies prompt upward revision of tariff guidelines

PETALING JAYA: The Association of Malaysian Hauliers reiterates that the upward revision of haulage tariff guidelines effective June 1 reflects that the industry needs to improve on productivity and efficiency.

AMH said the continued escalation of operating costs and operational inefficiencies prompted the upward revision of the haulage tariff guidelines.

The revised tariff recommends the rates to be up by 20% over the current tariff.

“However, the AMH tariff guidelines are used in the market by both customers and hauliers as only a benchmark to negotiate for rates.

“The final negotiated rates differ customer to customer, depending on the services required, volume of business, destinations and other operational factors unique to each customer and their preferred haulier,” said AMH president Datuk Ahmad Shalimin Ahmad Shaffie.

According to AMH, the liberalisation of the haulage industry had seen an increase in container haulage operators to more than 200 companies throughout the country.

However, in recent time these operators, most of them members of AMH, found that productivity and efficiency has suffered due to various problems and bottle necks in the industry which are beyond their control.

AMH said the shortage of drivers, higher wages, increased costs for spare parts and tires as some examples of factors driving up operating costs. Customers’ demand for better services further resulted in record high investment in IT as well as GPS systems. “Long delays at container depots have badly affected the productivity of the haulage operators.

“This problem is not anticipated to be resolved in the near future. The current productivity is estimated to average two to 2.5 trips per day compared to previous three to five trips per day for each truck. The association estimated that each truck wastes up to RM20 per trip due to these delays not to mention the loss in productivity and foregone revenues for each trip lost.

“Based on these factors, the AMH believes that a 20% increase in rates is reasonable and fair,” said AMH.

Alongside the announcement of the AMH tariff revision, the association also announced that the collection of trailer detention charges will be outsourced to an external third party. This new collection method also comes into effect June 1.

AMH said the prime mover to trailer ratio in Malaysia was one to seven, whereas the norm for this trade in all other countries was one to 1.5 at the most. The requirement for such a ratio is due to customers’ behavior unique to Malaysia, particularly in the detention of trailers beyond the norm of two to four hours to load or unload a container.

“The constant monitoring of trailers and collection of detention charges from customers is tedious and costly which sometimes lead to contentious arguments with customers.

“As such, members of the AMH collectively agreed to outsource the monitoring and collection task to a third party agent so that they may focus on their core competency of transportation.

“Forwarders, shippers and consignees are recommended to quickly get in touch with their respective hauliers for further details,” said AMH.

Source: BizStar

Shipping consolidation

The global container market is poised to consolidate in the next few years as AP Moller Maersk and other major shippers roll out bigger vessels, potentially forcing smaller rivals to drop out of an already oversupplied market.

Medium-sized container firms warn that a move by the majors to flood the market with mega ships could spark a “rate war” similar to 2009 when the market plummeted and most firms fell into the red in one of the industry’s worst downturns.

“We believe that ... the largest shipping companies will continue to expand the scale of economies of the industry,” said Thomas Knudsen, Maersk Line’s chief executive for Asia-Pacific region, at an industry conference in Singapore. “As we drive these scales of economy, it will be difficult for the smaller carriers in these industries to compete. That will drive consolidation.”

Maersk, the world’s top container shipper which holds a 15% share of the container market, is expanding its fleet by around 8% annually to keep up with economic growth.

“We are not doing this aiming at taking market share,” Maersk chief executive Nils Andersen told reporters at an industry event. He agreed that consolidation would be the most likely outcome.

One of Maersk Line’s container ships.

Industry leaders in the container markets have placed multi-billion dollar orders for the world’s biggest vessels to meet growing demand in Europe and the United States for Chinese manufactured goods.

Northport’s RM300m expansion depends on lease renewal

The implementation of the RM300mil expansion plan ofNorthport (M) Bhd, a port- operating subsidiary of NCB Holdings Bhd, will have to depend on the prospects of the lease renewal for the port.

NCB chairman Tun Ahmad Sarji Abdul Hamid said it had submitted the lease renewal application to the Government last week and was hoping for a favourable reply.

“Our application for renewal is done professionally where we have engaged a consultant for the input.

“We have been this business for more than two decades and possess the know-how of the business.

“The renewal of lease is crucial for us as it will determine our prospects.

“We are all geared up for expansion, and we hope that our early submission, site visits and discussion with the Government would accelerate the decision-making process.

“Assurance from the Government is a crucial factor in our expansion plan roll-out,” he told reporters after NCB's AGM yesterday.

Northport's 21-year lease agreement will expire in 2013. It has spent more than RM1.5bil on development since its privatisation about 25 years ago.

Nevertheless, Ahmad Sarji did not deny the fact that there could be other contenders eyeing the lease agreement for the port operation as well.

“I am always inclined to be prudent and cautious.

“There may be other contenders but at this juncture I don't know if there are any or who they are,” he said.

On the RM300mil expansion, Ahmad Sarji said Northport needed to expand its capacity due to increased demand and had initiated the development of wharf 8A into container terminal four.

The construction is planned to start in the second half of this year and expected to be completed in 2013.

This is part of Northport's RM580mil three-year expansion plan that was launched in 2008 but had been postponed due to the global economic downturn.

Ahmad Sarji also explained that the development of Southpoint, a terminal at Northport dedicated for the handling of non-containerised or conventional goods, would depend on the business review of Southpoint before a budget was allocated for its expansion.

Recently, concerns were raised by users of Southpoint, especially exporters of palm oil, on expanding and improving its storage installations and distribution facilities.

On its key performance indicators this year, Ahmad Sarji expects container volume at Northport to increase by 5% to about 3.5 million twenty-foot equivalent units (TEUs) in line with the country's manufacturing and gross domestic production prospects. Last year Northport recorded a 15.6% increase in container volume.

“For Kontena Nasional Bhd (NCB's haulage arm subsidiary), we are embarking on halal logistics business and cold-chain warehousing services.

“Of equal importance, especially for Kontena Nasional, is the cost cutting measures via the introduction of a tracking system that would improve the turnaround time and management of its assets,” he said.

NCB reported a net profit of RM137.4mil for the financial year ended Dec 31, 2010, down 2.5% from a year ago.

Its revenue for the period surged to RM887.9mil from RM831.4mil in 2009.

For the year under review, NCB's proposal for a final and special dividend of 30 sen per share less 25% tax was approved at the AGM.

This will see a payout of RM105.8mil on May 6.

Incorporating the interim dividend of 7 sen per share that was paid in last October, the total payout would accumulate to RM130.5mil.

“This is equivalent to about 95% distribution of our profits. NCB dividend policy complies with Perbadanan Nasional Bhd's of about 75% profits distribution,” he said.

Source: BizStar

Northport expects more traffic in 2011

Northport (Malaysia) Bhd, the port operating subsidiary of NCB Holdings Bhd, expects to handle 3.5 million twenty-foot-equivalent units (TEUs) this year against 3.3 million TEUs recorded last year. 

NCB Holdings Chairman Tun Ahmad Sarji Abdul Hamid said the group was optimistic of achieving the target based on improved global trade and the country's manufacturing output. 

The group will spend RM300 million for the expansion of Northport's terminal facility in response to increased demand, he told reporters after NCB Holdings annual general meeting here today. 

The new facility, to be constructed in the second-half of the year and completed by 2013, would increase Northport's capacity towards the vicinity of 5.5 million TEUs. 

Meanwhile, Ahmad Sarji said the NCB group has submitted a proposal to the government to renew Northport's licence which was due to expire in 2013. 

"We submitted this proposal and would like the authority to see how we operate. We hope the early submission of this proposal and with the authorities coming over to see our facilities will help accelerate the decision making process and thereby give us a good lead time for expansion," he added. 

He also said the RM300 million facility expansion was indicative of the group's earnest to pursue its business. 

"We hope this thing (investment) will add to our merit in persuading the authority to consider us favourably for the renewal of our lease," he said

Source: Business Times

Baltic Dry Index sheds 1.8% a week after Japan quake

A week after the tsunami disaster in Japan, the Baltic Dry Index (BDI), the benchmark index for commodity shipping, slid by 1.8% to 1,533 points on Thursday.

This was an indication that the reconstruction efforts by Japan had done little to boost dry bulk shipping freight rates that have been on a downtrend year-to-date.

So far this year, the BDI peaked at 1,693 points on Jan 4 and the lowest was at 1,043 points on Feb 4.

Dry bulk vessels carry global commodities such as coal, finished steel, grain, sand or gravel which are vital construction materials.

Dry bulk rates were under pressure from last year to the first quarter of this year due to the flooding in Queensland, Australia since there were fewer coal shipments to be exported. Australia is of the world’s largest overall coal exporters.

According to Reuters, Japan’s reconstruction efforts would do little to boost global freight rates that were nearing two-year lows as fleet expansion overshadowed any demand surge from the world’s third largest economy.       

The report cited Hong Kong-based Citigroup shipping analyst, Rigan Wong, who said there was as much as a 10% difference between demand and supply growth this year.

“Japan alone will not be able to push up demand in line with supply. That just isn’t possible,” he said.

Macquarie Securities shipping analyst Janet Lewis said she didn’t think Japan would affect dry bulk rates all that much.

“I still think we could see fresh two-year lows. Through the end of the second quarter, we will see the BDI firming up but probably not a whole lot higher than where we are now. I don’t expect we will get above 2,000 points anytime soon. Maybe we can get up to 1,700,” she said.

Reuters also reported that the supply glut was best reflected by the severe downturn in the daily earnings of cape-size vessels, which briefly dipped below US$5,000 in February after surging to nearly US$60,000 eight months before. Earnings traded at US$9,430 on Thursday.

Dry bulk ship owners ramped up orders of vessels before the economic downturn in 2008. It normally takes three years for a ship to be delivered and most of those vessels are now coming online, exacerbating an already oversupplied market.

The Reuters report also quoted an analyst who said the world’s dry bulk fleet, responsible for shipping iron ore, coal, grains and other commodities, was expected to grow between 11% and 13% this year to top an unprecedented 600 million deadweight tonnes - that would far outpace demand of between 5% and 8%.

On the bright side, the report said many of the ports in Japan were unscathed by the earthquake, providing ample capacity to import coal and other dry bulk goods.

Source: BizStar

Kuantan Port City + East Coast Economic Region

Kuantan Port City can attract RM38bil investments by 2020

KUALA LUMPUR: Kuantan Port City (KPC) is projected to attract up to RM38bil investments by 2020, and help the East Coast Economic Region (ECER) and the country’s first Special Economic Zone located within it, to be an industrial and logistics hub.

The ECER encompasses Kelantan, Terengganu and Pahang as well as the Mersing district in Johor.

KPC forms one of the main components of the development corridor. Encompassing 12,667ha, the completed project will see a throughput of 24 million tonnes, create 44,785 jobs and contribute RM9.3bil to the local economy by 2020.

According to a shipping analyst, KPC projects would certainly transform Kuantan Port into a mega port as the development calls for the expansion of Kuantan Port.

He said feasibility studies had been completed. “With new port facilities, it will enable the port to receive vessels above 40,000 tonnes or the next generation of container ships,” he said.

The analyst said KPC’s integrated development would also result in petrochemical, palm oil, automotive, container markets, as well as a major industrial and manufacturing zone serving the entire Asia-Pacific region.

He said KPC would also be the site for a Palm Oil Industrial Cluster (POIC) with one of its manufacturing components specialising in the downstream palm oil industry and the petrochemical cluster. Construction work at the POIC began in September last year. “The port city will improve the income and skills of the population while providing them with convenient and safe access to modern and efficient facilities and infrastructure,” the analyst said.

The Integrated Master Plan for KPC has been finalised and was handed over to the Kuantan Municipal Council last year.

Meanwhile, improvements in KPC’s main infrastructure, such as roads and drainage system, commenced this year.

To improve the water quality in KPC, a two-km water pipeline in Gebeng was completed and was handed over to the Pahang Water Supply Department in March last year. Land clearing and survey works for the construction of Panching Water Treatment Plant, are ongoing.

Once completed, the water treatment plant will have a capacity of 160 million litres per day, which will ensure adequate water supply, particularly in the Gebeng area.

To serve KPC, a multimodal network of highways, roads, railway and airports will move people and goods between KPC and the hinterland or the industrial clusters.

A logistics and distribution centre located near the port will also substantially improve the handling of goods.

KPC covers the existing Gebeng industrial area and Kuantan Port, up to the Mardi Institute in the north and the Pahang border in the west.

Source: BizStar

Malaysia needs to overcome major legal hurdles to fight high-seas piracy

THE recent pirate attack on a Panamian-flagged, Japanese-owned, Filipino-crewed, Malaysian-chartered, Singapore-bound tanker, the MT Bunga Laurel in the high seas off the Gulf of Aden highlighted the escalating seriousness of the piracy threat in that region.

Only the quick and decisive action of the Royal Malaysian Navy’s elite team of commandos or Paskal, prevented the horrific possibility of a hijacking and kidnapping for ransom of the vessel and the 23 crew on board. Seven pirates were apprehended.

The prosecution of the captured Somali suspects would be Malaysia’s first trial involving high-seas piracy and as such careful planning and implementation of the trial is essential to ensure successful prosecution of perpetrators.

(According to latest news report on Feb 1, the Somali pirates were remanded at the Bukit Jalil detention centre until Feb 6).

The event also highlighted the complexity of the piracy situation worldwide, especially on the question of what to do with the apprehended pirates. Unfortunately, it is not as easy as making them walk the plank.

Factors to be considered

Various factors have to be taken into consideration such as costs, logistics, ability to prosecute, due process, and human rights aspects.

Customary law codified in The Law of the Sea Convention 1982 (Unclos) establishes high-seas piracy as a universal crime. Pirates are described as enemy of mankind and as such, all sovereign nations have the jurisdiction to apprehend, prosecute, and punish acts of piracy regardless of where it happens, the pirate’s nationality, the registry of the ship or the destination of the cargo.

Unclos defines piracy as any illegal acts of violence, detention, or depredation, committed for private ends by the crew or the passengers of a private ship and directed against another ship or against persons or property on board such ship on the high seas or in a place outside the jurisdiction of any state.

It has to be noted however, that universal jurisdiction only applies to piracy beyond the jurisdiction of any nation, i.e., the high seas. Pirate-like acts that take place within the jurisdictional waters of a state, such as those that occur in the Straits of Malacca, remain the responsibility and under the jurisdiction of that littoral state and perpetrators are often charged for armed robbery.

Despite the carte blanche nature of universal jurisdiction, prosecution must still come under the framework of local legislation and many countries are wary of or unwilling to shoulder the responsibility of prosecuting apprehended pirates due to the logistical and legal burdens.

The escalating cost incurred throughout the duration for which pirates have to be kept in custody pending transportation and trial, the piecing together of evidence and the gathering of witnesses who may be scattered across the globe, the trial, language barriers, legal assistance to the accused, would all prove to be major hurdles.

Underage pirates will add another layer of complexity to the matter in terms of the different laws applicable as well as the need to adhere strictly to human rights standards.

Pirates are still humans and therefore, entitled to due process and fair treatment while in custody. Political concerns can also be a deterrent and the media scrutiny of the matter may not be welcomed. In the United Kingdom for example, the possibility of pirates staying indefinitely as asylum seekers after incarceration or due to failed prosecution has deterred the United Kingdom from transporting captured pirates for prosecution on UK soil.

Further, there is the concern over the likelihood of the suspects receiving harsh treatment in Somalia upon deportation which would violate British Human Rights Act.

Solutions available

To counter the various legal concerns and logistical difficulties of transporting pirates over long distances to be tried in the arresting state, arrangements were made with a number of East African States to prosecute arrested pirates and to help repatriate hostages.

Malaysia however, has not signed any memorandum with Kenya or Seychelles or any other East African country that allows them to receive and prosecute pirates caught by the Malaysian navy. As such, the choices of what to do with captured pirates are restricted to catch and release, handing over to the barely functioning Somalia, or transporting them to be tried in Malaysian courts. Catch and release will undermine international anti-piracy efforts and only encourage future acts of piracy. Handing them over to Somali authorities where they will most likely be treated harshly or released for being national heroes, is also not a viable option.

It is certainly commendable that the Malaysian Government has decided to prosecute the captured suspects on Malaysian soil thereby, shouldering its international obligations towards repressing piracy. The Courts of Judicature Act 1964 (CJA) and the Penal Code firmly establishes universal jurisdiction to prosecute high sea piracy in Malaysia.

However, the domestic legal framework for the crime is lacking. Malaysia does not have legislation or a provision catering specifically to the crime of piracy and has not incorporated any definition of piracy in domestic legislation.

As such, the captured suspects will have to be tried for other crimes that could best fit the bill such as armed robbery, criminal conspiracy or even terrorism if certain elements are met. Our dilemma is that while the suspects are brought here for the crime of piracy under the international principle of universal jurisdiction, yet when tried, are charged under different offences. Would Malaysia still retain the jurisdiction to try the suspects then?

The MT Bunga Laurel is neither a Malaysian registered ship, nor crewed by Malaysians. Malaysia’s links to the vessel are as the arresting state and in relation to the cargo. It would be less complicated if the ship was Malaysian-registered as it would then provide Malaysia the extraterritorial jurisdiction to try the suspects for any offence under the Penal Code or under any other domestic legislation. Piracy however, usually refers to a broad range of violent acts at sea. Illegal violent acts of piracy under Unclos include armed robbery, murder or assault.

Therefore, the suspects could technically be charged with armed robbery or other penal offences.

More comprehensive future

A comprehensive national anti-piracy enactment would ensure a more effective framework to try and punish pirates for various acts of piracy. It would provide for piracy whether within or beyond Malaysian jurisdiction and could cover acts such as hijacking, kidnapping for ransom, armed robbery or any act that jeopardises Malaysian interests at sea. It would dispel any uncertainty in conducting the prosecution and ensure that any piratical act committed would be met with just punishment. The right tool is required to do the job properly.

Malaysia and its neighbours have been exemplary in successfully suppressing pirate-like acts in the Straits of Malacca. High-seas piracy however, is a different kettle of fish. The recent attack on MT Bunga Laurel was not the first time that a Malaysian-linked ship has been targeted by pirates.

In August 2008, MISC tankers MT Bunga Melati Dua and MT Bunga Melati Lima were hijacked within days in the Gulf of Aden. It is high time for Malaysia to improve its legal regime concerning piracy by enacting a national anti-piracy law.

It was reported in the media not so long ago that a national anti-piracy legislation is in the pipeline. This is certainly a positive development towards enhancing and strengthening the domestic legal framework to deal with piracy that threatens Malaysia’s maritime interests in whatever form.

Perhaps, the Government could also look into the various regional efforts against piracy and consider entering into other joint cooperation efforts. Until a robust international legal regime dealing with piracy can be established and a strong domestic legal framework developed, the best recourse would lie in taking the necessary deterrent steps to foil any pirate attacks before they occur.

● Melda Marissa Malek is a researcher with the centre for ocean law and policy, Maritime Institute of Malaysia. The author is indebted to Amy Aai and Shantini Guna Rajan for their helpful comments and feedback.

Source: BizStar

Delicate outlook for container, dry bulk

Container and dry-bulk shipping sectors in the Asia-Pacific are still facing uncertain times.

Slower demand from Europe and a stream of newbuildings that was anticipated to enter the market this year were factors impinging on the container shipping sector, said investment banking group Nomura International (HK) Ltd in a report recently.

Meanwhile, the dry-bulk sector continued to suffer from oversupply of vessels, and was currently hampered by low freight rates due to the recent floods in Australia, it said.

Nomura remains cautious on the container shipping sector as demand growth in Europe is set to be slower than that in the United States.

The key earnings driver would be the Asia-to-Europe routes, which experienced higher margins and profitability last year.

“Supply of vessels is likely to be focused on those exceeding 10,000-TEUs (twenty-foot equivalent units).

“The order book is skewed towards this segment, which accounts for 45%. The supply of vessels of this size is set to grow by 98% this year,” it said.

However, Nomura said port and route limitations were preventing these large vessels from operating on many Asia-to-US routes.

“Carriers also face cost pressures from higher bunker oil prices and terminal-handling charges, primarily from Chinese ports,” it said.

Nomura estimates that Asia-to-Europe freight rates would drop by 4% this year while trans-Pacific freight rates would increase 1% despite the fact that annual contracts, for which negotiation usually ends in May, are likely to be concluded marginally lower this year.

“The main reason for these diverging freight rates is the way the routes are structured, mainly on a quarterly basis for the Asia-to-Europe routes and annually for the trans-Pacific routes.

“We also estimate that Asia-to-Europe routes would have higher spot contracts and a greater percentage of freight forwarders on the European routes than end-users on the US routes,” it said.

For dry-bulk shipping, Nomura said oversupply, slower demand and inflation concerns continued to plague the outlook for sector.

“While we believe these are valid concerns, we estimate that current freight rates are at artificially low levels due to bad weather and flooding problems in Australia,” it said.

With iron ore and coal each accounting for 30% and 27% of total volumes, Australia is a key export region of the raw materials, given that the continent is the largest exporter of iron-ore and second-largest of thermal coal globally.

“Once the Australian flooding problem eases, we expect a rebound in freight rates, although this will still be lower than historical highs, given the problem with the supply of vessels,” it added.

Nomura said supply growth remained a concern for the sector. Despite record newbuilding deliveries last year, orderbook as a percentage of current fleet remains at 52%.

“We estimate net supply growth of 11.3% in 2011 and 2012 respectively, after factoring in a 42% newbuilding delivery slippages in both years.

“This is higher than in 2010 with newbuilding slippage of 36% due to lower freight rates this year and 2012,” it said, adding that scrapping was the wild card, given that 31% of the existing fleet was over 20 years old.

Newbuilding delivery slippages refers to new vessels that do not enter the market.

Nevertheless, Nomura remained relatively optimistic that demand for iron ore and coal (thermal and coking) would remain strong.

Source: BizStar

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.