Shadowy prospects - Maritime Institute of Malaysia
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Shadowy prospects - Maritime Institute of Malaysia
SOUTH EAST ASIA INTRODUCTION S o u t h E a s t A s i a PHOTO: © DEEPTA | DREAMSTIME.COM GLOBAL VIEW Shadowy prospects How the dramatic effects of the downturn will play out across different countries in SE Asia remains far from clear, reports Jacintha Stephens ingapore-based NOL, parent of boxline APL, is something of a bellwether among ship operators in Southeast Asia. Imagine then the consternation when in February it reported an 84% drop in profits for 2008, imminent lay-up of 15 ships and the deferral of newbuildings. NOL ceo Ron Widdows did not mince his words. ‘The severity of the collapse in global trade over recent months is without precedent,’ he said. Widdows is well-placed to comment. Singapore remains the world’s busiest container port, with PSA Singapore Terminals the world’s busiest transhipment hub, handling around one fifth of all containers transhipped worldwide. Throughput for 2008 as a whole was up 7%, to 29m teu, but as PSA Int’l group ceo Eddie Teh admitted, by yearend ‘global trade worldwide had slowed to crawl.’ But the full effects of the unfolding economic drama on different countries in the region are still far from clear. Like in a traditional ‘wayang kulit’ or shadow puppet play, there are powerful forces – seen and unseen – at work shaking the established order that as yet are visible only in silhouette. Rattling the regional maritime industry to its core is the downward spiral of demand for Asian exports from major economies, thereby collapsing trade volumes in the Asia-US and Asia-Europe routes. Add to this other developments such as the lack of S Chinese iron ore demand and the plunging new car market, and you get a rapid erosion of sentiment. But exactly which Southeast Asian countries will be worst affected and why remains open to debate. Singapore’s economy being the most open in Southeast Asia meant it was the first to be affected, believes Capt. Lim Yuon Fatt, head of the Shipping Business section at Singapore Maritime. Not helping matters is the fact its domestic market is so small, and the republic’s maritime sector is heavily service orientated. ‘If there's less cargo, then there is less demand for ships and ports services,’ he says. Maritime Institute of Malaysia (Mima) research fellow Nazery Khalid maintains that Malaysia has less cause for worry since its economy ‘is more diversified and has more depth and breadth. Like many other Southeast Asian nations it can still rely on local cargo generated by economic activities in the hinterland and demand from a fairly large local domestic markets,’ he says. Others believe Malaysia will potentially be the worst hit of all countries in South East Asia on account of commodity price collapse combined with a higher dependence on exports. ‘This could mean a double whammy for Malaysia,’ says maritime industry consultant David Wignall. Indonesia, by contrast, should prove fairly resistant to external problems because the low cost JACINTHA STEPHENS CONTENTS 41 INTRODUCTION 43 THAILAND / ReCAAP 45 INDONESIA 48 MALAYSIA March/April 2009 41 SOUTH EAST ASIA THAILAND / ReCAAP PRECIOUS SHIPPING RETAINS VALUES IN BULK DOWNTURN K its benchmark BDI index from an all time high to a halid M Hashim, founder and md of Thaitwo-decade low. In such circumstances you must based handysize dry cargo specialist Precious expect a ‘raft of bankruptcies and host of Shipping Limited (PSL), believes that by renegotiations,’ he says. avoiding certain ‘cardinal sins’ of ship owning his But for PSL it is rather a time of opportunity, as company has been able to buck the downtrend. company in the market for the adopted the cautious strategy of PSL second-hand purchases. At end 2008 not buying any assets or extending the PSL fleet totalling 1.13m dwt had credit lines during the ‘crazy boom time.’ an average ship age of around 21 Instead it sold 10 ships in 2007 ‘at the years. ‘The company will continue to peak’ of the cycle, and locked in charters be on the lookout for the right for more than 30% of its forward fouropportunities for additional fleet year book at rates that Hashim describes renewal,’ says Hashim, ‘as we would as ‘extremely robust compared to the like to achieve an annual fleet current spot market rates’. ■ Khalid Hashim strength of between 50 and 70 ships The company is one of the biggest within the next few years.’ players in the handysize sector having 1.5% of the Specifically, PSC is looking to replace 25 ships world fleet capacity, with its existing 44 ships and from the current fleet with younger and larger 18 ships on order. Net pre-tax profit for Q4 2008, tonnage within the next two years. ‘The existing after the dry bulk market had tanked, was a financially stressed conditions are the opportunity ‘fantastic’ $35.02m, Hashim points out, averaging a that we had been patiently waiting for,’ says very respectable $16,325 per ship per day. Hashim, ‘and if implemented successfully, will For the dry bulk sector as a whole, Hashim says ensure the long-term profitability of the company the next 12 months are looking bleak, hardly over the next two to three decades.‘ surprising after the sudden fall-off of nearly 95% in base of its exports will provide a cushion against the worst impact of the global recession, believes Wignall. He sees ‘reform within the country providing opportunities from its own internal market,’ and even goes even goes as far as to suggest that ‘perhaps this is the crisis where Indonesia comes to its rightful position as the lead economy in the region.’ Elsewhere in Southeast Asia, Thailand will suffer from a downturn in shipping volumes ‘not too badly,’ he feels. In Vietnam, a slump in container exports is of concern at present but is expected to be short-lived. Rather Wignall feels the real concern may be the number of container port developments underway and the potential for terminal overcapacity. ‘The Vietnam economy has a comparative cost advantage and the continued easing of Government control on the economy is perhaps more important in the longer term than the impact of the global slow down,’ he says. To some shipping company heads in the region, such as Khalid Hashim, of Thai dry bulk operator Precious Shipping (see box above), China continues to hold the key. He points out that national steel mills have responded to China's reduction in steel demand – estimated to account for 50% of global iron ore trade last year – by planning to cut production by 20-30% in 2009. ‘This cutback will feel like a kick in the face for the freight market during 2009,’ he says. ‘Our only hope is that the recently announced Chinese government stimulus plan of $586bn to be spent on infrastructure and other developments during 2009, would help lessen this blow.’ Analysts say the dry bulk outlook has since improved from bleak to cautious. John Lu, chairman of the Asia Shippers’ Council, believes that ports like Singapore dealing mainly in finished-product cargo are hit harder than those involved in the bulk cargo trade. ‘Bulk cargo trade has been more stable than finished products,’ he says, meaning countries with a more mixed port throughput portfolio – like Malaysia, Indonesia, Thailand and the Philippines – will be less impacted by the recession. However, Lu also predicts Singapore's maritime industry will become stronger and have more of an edge in the long term, given how pro-active its government in continuing to boost infrastructure, efficiency and IT during this time of slower growth, for its longer term competitiveness. He warns that governments in the region which are not stable and/or do not have the resources, may not be able to similarly build up their maritime sector. Similarly for multinational maritime companies operating in the region there is ‘opportunity in adversity.’ Bengt Ekstrand, GAC’s regional director for Asia Pacific, tells Seatrade that Singapore and the wider region remain a very important market for the company, and ‘all going well, you will see the GAC flag planted in a few more Asian countries in the not too distant future.’ And as Nazery says, no bear market lasts forever. ‘This storm, like many others over the decades, will pass, and the shipping markets and maritime sector (in South East Asia) will then recover - fast.’ ■ ReCAAP s piracy issues in the Gulf of Aden, and more recently off Nigeria, preoccupy the maritime community, the Regional Cooperation Agreement on Combating Piracy and Armed Robbery against Ships in Asia (ReCAAP) continues its valuable work. ReCAAP informs that the number of reported incidents of piracy and armed robbery against ships in Asia totalled 96 - 83 actual and 13 attempted last year. Severity of the attacks was far less than in the 20042007 period, and the situation was notably improved off the port of Chittagong, Bangladesh, and in ports and anchorages of Indonesia, reports ReCAAP. In the Straits of Singapore and Malacca, where the piracy situation reached a nadir in 2004 prompting the coordinated naval patrols by the littoral states and the founding of ReCAAP, an increase in the amount of attacks on tugboats was noted. Similar attacks also took place off Pulau Tioman, Malaysia. In general tankers were more affected last year than previously, ReCAAP also noted. Meanwhile, the Federation of ASEAN Shipowner Associations (FASA) has joined the international shipping community in calling for governments to commit to increased numbers of deployed warships in the Gulf of Aden. Singapore announced this February that it would commit a naval ship and two helicopters from the Republic of Singapore Navy (RSN) to join in the US-led Combined Maritime Forces coalition to combat piracy. The Royal Thai Navy is also understood to be monitoring the situation. And the Malaysian Maritime Academy (Alam) is developing a new course on piracy management to better equip its cadets in the case of attack. A March/April 2009 43 SOUTH EAST ASIA INDONESIA BERLIAN LAJU TANKERS erlian Laju Tankers (BLT) is one of Indonesia’s largest and most rapidly expanding maritime players. It currently operates 61 chemical tankers, 14 oil tankers, 12 gas carriers (including one LNG carrier) and one FPSO, with an average age of 9.3 years. The company took delivery of 10 new tankers and one secondhand lpg carrier in 2008. B Steady progress Indonesia is plotting a course that will see its national shipping industry develop in sustainable fashion, aided by stricter cabotage requirements shipping, agree overseas players installed in Indonesia aka Singgih, md of Bumi Laut Group, says, such as Singapore-listed Marco Polo Marine, a tug ‘Indonesia is very familiar with problems – and barge operator and repairer. Ceo Sean Lee says both natural and man-made,’ says. He 2009 will be a more ‘challenging’ year than 2008, believes that after coming through the when the company’s net profit rose 33% to S$11m, economic crisis of 1998 and the 2004 tsunami, the and that the company’s main focus will shirt towards country is now better equipped than before to ship repair as that sector is ‘quite healthy’ at present. weather the current global economic storm. Marco Polo’s first drydock is already in Singgih (pictured), who is also a place on Batam Island, a growing ship member of parliament of the Republic of services base lying just off Singapore, and Indonesia, describes the country’s later this year another drydock and a shipping industry as being at a major jetty will be completed. turning point with a the renewed focus Operating out of Indonesia has not on cabotage laws, which have long been always been ‘straightforward’ for a in place but never really been enforced. In company like Marco Polo, concedes May 2008 the Government issued a new Lee, but on the whole has been a shipping law affirming the ■ Jaka Singgih ‘positive’ experience. implementation of cabotage to restrict Singgih believes that while the Indonesian foreign flagged ships from carrying certain types of government has a roadmap for the country’s cargo within the Indonesian archipelago – with its economic development, things are not moving fast thousands of islands and extensive coastline. enough for the shipping industry to really develop. He Indonesian investment in shipping – as gauged by mentions poor port infrastructure, congestion, low the size of the national flag fleet – as well as cargo productivity and bureaucracy as all posing obstacles. volumes have both been on the rise of late, reported To fully tap the opportunities that are out there the Oentoro Surya, president of PT Arpeni Pratama Ocean Indonesian shipping sector must embrace foreign Line and chairman of the Indonesian National participation and collaboration, he says, and move Shipowners’ Association (INSA), speaking at the away from an inward-looking mindset and reliance Maritime Indonesia event last November. The national on a protected market. Hence his decision to chair the fleet rose from about 6,000 ships in 2005 to more newly formed Indonesian Shipping Association than 7,800 in 2008, while the portion of domestic Turning to his own Bumi Laut Group, which maritime trade carried by Indonesian vessels owns, manages and operates some 30 ships, increased from 55% in 2005 to 65% in 2007. Singgih says business is strong throughout the According to Oentoro, Indonesian shipowners shipping agency, chartering, tramping of bulk see application of the cabotage law as helping to cargoes and energy transportation business units. mitigate the impact of global shipping turbulence He tells Seatrade that the group has plans to as it empowers national shipping and allows for extend the reach of it shipmanagement and better financing. shipbroking operations into third-party business. Significantly, Indonesia may be about to go into Logistics, inland support services and marine and election mode, when the government is expected to offshore businesses will also all be priority growth spend to improve the business climate, which may sectors, he says, with the group’s experience and explain why the government is predicting a 2009 skills, honed over three generations, allowing it to growth rate of 6.2%, down slightly from 6.4% in 2008. navigate through the current ‘choppy seas’. ■ Cabotage laws are expected to boost national J ■ Hadi Surya President commissioner Hadi Surya points out that more than 90% of group business is derived from cross trades, with Indonesian state oil and gas company Pertamina contributing only about 6% - a proportion that may change as the cabotage laws kick in and Pertamina’s current 75% reliance on foreign hulls is wound down. Otherwise no single client represents more than 5% of total business, he says, which serves to spread and minimise risk. BLT has been listed in Singapore since 2006, and reported a net profit of $161m for the FY to end September. Acquisition of Chembulk Tankers in 2007 contributed to the improved result, and the company now lays claim to being the world’s second largest owner/operator of IMO Type II chemical tankers. It currently has another 17 vessels on order of which 12 are chemical tankers with IMO Type II/III classification and stainless steel cargo tanks and another five gas tankers, all for delivery between 2009 and 2012. March/April 2009 45 SOUTH EAST ASIA MALAYSIA ■ Port of Tanjung Pelepas Revised targets Malaysian shipping in general, and ports in particular, are reassessing previous plans for growth in light of the current slowdown in trade he jury is still out on how the Malaysian shipping industry will cope with the economic downturn but ‘already some players are reeling from falling demand for their services,’ says Maritime Institute of Malaysia (Mima) research fellow Nazery Khalid. ‘Even the mighty have not been spared.’ Case in point is Malaysia's leading international shipping line, MISC Bhd, which recently cancelled orders for new chemical tankers placed with a Korean yard in the wake of gloomy prospect in the chemical tanker trade. It also scrapped a RM3.2bn bid to takeover oil services company Ramunia Holdings Bhd in November 2008. While MISC’s container operations – especially on badly hit Asia-Europe services – have likewise been affected, these represent a smaller proportion of overall business than the energy trades. In its core business of LNG, where the company owns one of the world's largest LNG fleets of nearly 30 tankers, prospects still look good. But arguably the biggest question mark hanging over Malaysian shipping concerns the government’s ambitious target for national ports to triple their current throughput handling capability by 2020 and in particular to attract more main container lines to call Malaysia. The current slump in trade between Asia and Europe/US makes this seem a very tall order, although intra-Asia transhipment traffic is reported to be holding up fairly well at present. The Ministry of Transport, which oversees the Maritime sector, is currently embroiled in an investigation of its ‘soft loan’ funding for Port Klang's Free Trade Zone (PKFZ), which effectively had to be bailed after Jebel Ali Free Zone exited the project. T ‘We can emerge as a stronger, more resilient port when the economy picks up.’ Capt. Ismail Hashim ceo, PTP 48 March/April 2009 Port of Tanjung Pelepas (PTP), the country's main transhipment hub, managed to marginally grow traffic 1% last year to 5.6m, largely thanks to ‘local’ hinterland throughput up by more than 40% or 94,000teu from the 2007 level of 218,000teu. Main liner customers are Maersk, Evergreen, MISC and most recently Hapag Lloyd. New ceo Capt. Ismail Hashim explains that as a major transhipment port, PTP is very much dependent on international trade. ‘It is important for us to weather the crisis in an effective manner so that we can emerge as a stronger, more resilient port when the economy picks up,’ he tells Seatrade. The coming year will therefore be a highly challenging for both PTP and the liner industry, he says, as both will have ‘to manage costs, even as they still explore opportunities to increase throughput volume’. PTP is currently developing berths 11 and 12, which will provide another 720mtr of wharf space to the south of Berth 10, bringing the total quayside length to nearly 4.4km.’ Both berths, which will be equipped with the world’s largest and latest dual hoist cranes, are due for completion this year, followed by backlot with space for 40,000teu. Total investment will be about RM750m. Ensuing plans for berths 13 and 14 have been put on hold, however, pending more favourable economic conditions. Port Klang last year handled 7.97m teu, a rise of 12% year-on-year, through its two facilities Northport and Westports. Northport posted the lower increase of only 7% due to its greater exposure to import and export cargo handling. Growth is expected to further slow this year. SOUTH EAST ASIA MALAYSIA ■ Port Klang Westports recorded a stronger performance, growing volumes 15% to 4.97m teu last year. Executive chairman Tan Sri G. Gnanalingam is being realistic, however, in setting the 2009 target back down at 4.5m teu, deferring the attempt to ‘beat the 5m teu mark’ until 2010. He also derives understandable pride from the port having snaffled two world records for productivity, in one case working on a new vessel belonging to main Westports client CMA CGM. Gnanalingam's son and Wesports executive director, Ruben Emir Gnanalingam, has gone on record advising stakeholders and staff ‘not be overalarmed by the bleak outlook predicted for Malaysia’s economy in 2009’. He assured them that the company has taken every step possible to make sure they are ready for the economic crisis. ‘Looking forward, in 2009, we will be embarking on plans to consolidate our business in terms of processes, skills of employees and our improvement initiatives company wide in a relatively quieter period.’ He assured employees that ‘there will be no retrenchment or reduction in our workforce except for the non-performers’. The maritime sector will remain critical to Malaysia's development, as 95% of the country’s international trade is seaborne and all its oil and gas resources lie offshore, believes Mima’s Nazeri. He predicts the current economic turmoil will result in the survival of the fittest and make the industry less fragmented. ‘Players in the industry who grit their teeth and weather the current storm will be rewarded for their resolve and patience once the global economy and trade volumes rebound.’ ■ ■ Tan Sri G. Gnanalingam, Westports chairman BOMINFLOT HP AD March/April 2009 49