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The prospects for demand for shipping and logistics services remain positive
in the light of the prognosis of the global economy.
“However, there are major concerns impacting on the sustainability of the
freight rates and prices,” said the chairman of Malaysian Shipowners’
Association (MASA), Ir Nordin Mat Yusoff.
Speaking after the Association’s 29th Annual General Meeting in Kuala Lumpur
last week, Ir Nordin said surplus capacity is emerging as a serious concern
in specific sectors of the industry and this will compound the easing off
demand.
“Capacity in the container shipping sector, for instance, is expected to
expand by about 16 per cent this year and the dry bulk sector by about 6 per
cent. The growth in demand during the year will not be able to take up the
new capacity,” he said.
Nordin said the container sector is expected to witness the entry of several
new and large ships (8,000 teus) that will push the freight market down.
Easing of the market is already being felt in the Asia Europe trade and this
could accelerate after September this year, he noted.
“The freight market in the tanker trade is also softening not because of
weaker demand (because demand for oil is still sustained) but due to new
tanker capacity entering the market,” he said.
There are also greater concerns on rising costs, attributed to increasing
oil prices, currency fluctuations and spiralling managing/ operational costs
arising from entry of new rules & regulations.
However, individually, shipping companies that saw record level profits in
2005 may not be able to improve much in 2006 or even repeat the achievement
due to the plateau market condition but also to inability to make
extraordinary gains from the sale of ships as many did during the 2004/05
period, Nordin said.
The softening is also due to the increase in supply capacities with the
delivery of newbuildings during the year and 2007 (that shipowners rushed to
build on account of the buoyant market condition in 2004/5).
Nordin said increase on bunker fuel price will be a major threat to rising
operational costs that owners will continue to face under the current
operating environment. The de-pegging of the ringgit last July could create
some negative implications to some of the shipping lines that are exposed to
international trading. There has also been modest increase in premium for
hull insurance cover.
The MASA chief welcomed the decision by the Government to postpone the
implementation of the Goods & Services Tax (GST) and added a major source of
our anxiety is the ambiguity over the imposition of the new multi-stage tax
collected on sales at all stages of production and distribution.
Nordin said MASA has raised important implementation issues regarding how
the new tax regime on its impact the shipping industry and we hope to have
further dialogues with the Ministry of Finance on this issue.
He also said MASA looked forward to some policy initiatives towards
tightening implementation of the Cabotage Policy that is now 25 years old.
MASA, he said had three meetings with the respective parties and provided
its views on how some administrative measures, especially with regards to
the process flow and the issuance of dispensations, could be strengthen the
implementation of the Cabotage Policy that is aimed at fulfilling specific
national objectives. |
