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Maritime industry sails into choppy waters in 2016

by December 21, 2016 General

KUALA LUMPUR: The sombre mood encircling global trade in 2016 caused the maritime industry to sail through choppy waters, while forcing players to realign strategies to sustain business.

The lower global economic growth forecast of 2.4% for the year was also a downward revision from an earlier projection of 2.9%. This has forced the players to continue to be wary of 2017 and its static outlook.

Elaborating on plans going forward, Johor Port Bhd, a unit of MMC Bhd, aims to further increase the number of direct calls to intra-Asia destinations and facilitate more activities in commodity trading.

This, would reinforce its position as a regional commodity hub as well as create new focus areas – including a steel hub – to curb the impact of the economic slowdown.

CEO Shahrull Allam Shah Abdul Halim said Johor Port was aggressively pushing for more commodity trading, especially in steel, due to the growing number of tenants involved in the steel and scrap metal industry migrating from neighbouring countries.

“Facilitation and investments in related infrastructure and equipment will help increase the local conventional cargo volume for tenants, concurrently contributing towards Johor Port’s revenue growth,” he said.

The Baltic Dry Index (BDI), which measures shipping costs for commodities including iron ore, copper and steel, surged 325% to 1,204 points, from an all-time low of 290 points in February this year. However, as at Dec 14, the BDI stood at 1,003 points.

As the shipping activity winds down with the year coming to an end, things are expected to remain quiet, at least until the Lunar New Year holiday at end-January 2017.

For this year, among the other developments in the maritime industry was the acquisition of Baltic Exchange Ltd on Nov 8 by the Singapore Exchange Ltd for S$149.6mil. Singapore is Malaysia’s closest maritime competitor.

However, Baltic Exchange which is the global centre for maritime trade and a clearing house for shipping contracts, will remain at its current base in London.

As for the merchant fleet, the Germany-based ISL Institute of Shipping Economics and Logistics, said it had been steadily falling with dry bulk vessel orders declining sharply in 2015 to 18 million dwt from 63 million dwt in 2014.

The order book for ships declined to 124 million dwt at the start of 2016 from 166 million dwt at beginning-2015.

It is also projected that the lower order book would see low fleet growth in 2017 at 1.7% and 0.7% in 2018.

On the home front at present, Malaysiaa registered tonnage depleted to 8.608 million dwt from 9.472 million dwt in 2012.

According to data retrieved from the Malaysia Shipowners Association and Malaysia Offshore Support Vessel Association, there were 101 vessels lying idle in March 2016, 59 in June and 67 in August.

These offshore support vessels (OSVs) mainly transport liquefied natural gas to the Far East and as for petroleum cargo, within Malaysia.

Also weighing on the OSV activities, is the downtrend in global oil prices with the benchmark Brent Crude currently trading at US$55.21 per barrel, while West Texas Intermediate Crude lingers around US$51.9 per barrel.

Most analysts are predicting prices to settle at US$50 per barrel in 2017, far from a favourable level.

Another news that sent a tsunami of sorts through the global shipping waters, was the bankruptcy of the world’s seventh-largest integrated and containers transport company, Hanjin Shipping Co Ltd of South Korea.

The company used to transport over 100 million tonnes of cargo annually.

The news had a hard knock-on effect on global sea freight as Hanjin’s ships were not allowed to dock at most international ports, with some stranded in the open seas.

However, the Hanjin scenario had no effect on local port operators.

Westports Holdings Bhd CEO Ruben Emir Gnanalingam Abdullah said the port’s bottom line was not really affected as shipping lines suffered losses previously and re-emerged profitable.

Mitsui OSK, CMA CGM and Maersk Line are examples of 11 global shipping companies that announced huge losses in the past.

“Container freight rates have also improved significantly with Hanjin’s bankruptcy, and this should help the revenue of all other container lines,” he added. – Bernama