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The Malaysian shipping industry recorded one of its best ever performances
in recent years with shipping companies reporting unprecedented increase in
revenues and profits.
"Shipowners in Malaysia can only wish if only 2004 was like every year,"
said the chairman of Malaysian Shipowners Association, Dato' Dr Nik Mohd
Zain.
Dr Nik said most of the shipping companies saw impressive increases in
revenues and earnings because of strong demand for shipping services,
particularly in the second half of the year.
Shipowners benefited from higher freight rates for the carriage of a wide
variety of cargoes while shipowners who chartered out their vessels also
gained from higher charter hire rates.
Baltic Dry Index, for instance set another record high on 3 December 2004 at
6,172, with the average time charter for Capesize bulk carriers touching an
unprecedented high of US$102,365 per day. Early in the year it was hovering
under US$50,000.
Tankers rates also shot through the roof and hit record levels giving
companies unprecedented increase in earnings, including as reported by
Malaysia International Shipping Corporation Bhd.
Dr Nik attributed the surge in the market to a number of factors including,
led by the "China factor".
He said market surged in Chinese iron ore and steel imports, improved
economic performance from the OECD countries, rising long-haul grain trade
and continued coal demand in Europe and the US.
"The tight shipping capacity worldwide and the supply squeeze pushed by
shipping rates to record levels last year 2004," he said.
Dr Nik said the supply squeeze and the insufficient number of new ships
entering the market impacted on ship prices and in many cases pushed market
prices of ships to several times higher than book value of the ships.
"This presented with shipowners with an ideal market opportunity to sell off
their assets, particularly vessels that were ageing or had to meet nearing
deadlines of new ship conventions and rules, particularly for tankers and
dry bulk carriers," he noted.
In Malaysia several owners also capitalized on the higher ship prices,
notably, Malaysia International Shipping Corporation Bhd which unloaded 32
bulkers in the market for US$724 million.
"Of course the downside is that the size of Malaysian merchant fleet which
had been painfully built over the years has suddenly declined," he said.
Total MASA members' fleet strength which stood at 10.1 million dwt at the
end of 2003 lost by about 1.7 million dwt in 2004 because its members sold
off their ships in buoyant market condition.
Reviewing the activities of MASA, Dr Nik said the year was an active one for
the association, especially in responding to issues relating to the entry
and initiatives on a number of new rules, regulations and conventions
affecting the global shipping industry.
"The most important regulation that affected the shipping industry during
the year was the entry of the International Ship and Port Security Code in 1
July 2004 and Malaysia was among the majority of countries that was able to
meet the deadline, thanks to the Malaysian Marine Department," said Dr Nik
Dr Nik said MASA worked closely with the Marine Department to ensure that
flow of shipping traffic was not interrupted when maritime security Code
entered into force.
The International Maritime Organisation-mandated Code was enforced worldwide
as part of an enhanced global maritime security measure initiated following
the aftermath of 911.
He said MASA also presented its memorandum to the Ministries of Finance and
Transport on a number of pressing issues facing the industry, including the
need for a wider definition of Malaysian ship to enjoy the blanket tax
exemption given to the shipping industry.
During the year the industry also appealed to the government on the
directive by the Immigration Department on the need for temporary work
permit for foreign seamen working on board Malaysian registered tugs in
domestic waters.
At regional level, Dr Nik said MASA was involved in The Federation of Asean
Shipowners' Association and Asian Shipowners Forum at which common industry
issues were discussed.
"We attended several FASA and ASF meetings and among the key matters raised
were the piracy and armed robbery, phasing out of single hulled tankers,
maritime security and safety and issues relating to employment and working
condition of seafarers," he said.
He said there was also consensus among members of the ASF fraternity on the
need to understand the unusual market condition and to act rationally.
Financial Performance of Shipping
Companies Listed
on Bursa Malaysia
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