Survival of the fittest

The local maritime industry is expected to sail in choppy waters this year as global trade continues to decline.

But the impact of the global economic downturn on the country’s goods transportation sector is expected to be cushioned as intra-Asia trade is still at a healthy level.

This is reflected by the fact that all major ports in the country – Westports, Northport and Port of Tanjung Pelepas – met their volume targets last year.

The three ports are only anticipating slower growth this year as they could still rely on intra-Asia transhipments as well as the import and export business.

For example, although the price of crude palm oil has been falling in recent months, exports to India, one of the major importers of our crude palm oil, is still robust.

Northport, a major import and export terminal in Port Klang, posted slightly above three million 20-foot equivalent units (TEUs) last year, up 5% from 2007.

Due to its large exposure to import and export cargo handling, the port is expected to post slower growth this year compared with last year.

But Northport managing director and chief executive officer Datuk Basheer Hassan Abdul Kader earlier said with the company’s low gearing of almost 0%, Northport could withstand the onslaught of the global economic crisis.

Westports, which has more transhipment business, is in somewhat better shape in terms of volume.

But the declining trade is also affecting Westports’ volume to a certain extent, and the port does not expect its “usual” double-digit growth this year.

The port recorded about 16% volume growth in 2008 to slightly less than five million TEUs.

The country’s main transhipment port, Port of Tanjung Pelepas, posted just below 5.8 million TEUs last year, slightly below expectation, but an increase of about 6.1% over 2007.

Malaysian shipping companies which are mainly involved in the container, bulk and crude palm oil (CPO) transportation are also not spared from the whiplash of the global economic crisis.

MISC Bhd, which operates a relatively small container shipping business compared with its main activity of liquefied natural gas (LNG) transportation, should withstand the lower demand in container cargo.

The country’s major bulk carrier operator, Malaysian Bulk Carriers Bhd (Maybulk), has now ventured into the lucrative offshore support vessel (OSV) market after a collapse in bulk transportation where the Baltic Dry Index plunged more than 90% from its peak of 11,793 points on May 20.

Maybulk has also completed its proposal to acquire a 22.08% stake in PACC Offshore Services Holdings (POSH) for US$221mil.

Based on the current local and international demand, the OSV sector outlook is expected to be positive this year.

For main players in the OSV market such as Alam Maritim Resources Bhd and Tanjung Offshore Bhd, it should be smooth sailing.

The current stronger oil price, which breached US$50 per barrel recently, will also propel OSV demand to greater heights this year.

But future financing for fleet expansion could be difficult as banks are getting jittery on lending, especially for this particular capital-intensive industry.

Thinking ahead, Alam Maritim recently entered into a joint venture with CIMB Private Equity to acquire five vessels for a total of US$70mil.

The local logistics sector is already feeling the pinch of the declining trade. This is due to Port Klang’s monthly volume that has contracted by as much as 25% in the past few months.

On the bright side, the current economic turmoil will result in the survival of the fittest and make the industry less fragmented.

Source : STAR Maritime

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