Syscorp expects charter rates to remain under pressure

KUCHING: Shin Yang Shipping Corp Bhd (Syscorp) said overcapacity in the industry and weak demand will continue to pressure charter rates.

“The demand is not strong enough and everybody (shipping firms) is fighting for the cargo,” group financial controller Richard Ling told StarBiz when asked on the market outlook for the shipping industry.

It was reported that the Baltic Dry Index (BDI), which measures charter rates across dry bulk ship sizes and routes, recovered from its low of 290 points on Feb 2 to hit 429 points on March 31. The index further recovered to more than 500 points late last week but was still below 2015’s average of 718.

Syscorp, which operates a fleet of nearly 290 vessels, including those deployed in Middle East operations, transports mainly timber products to the Far East region. Last year, the group shipped some 580,000 cu m of timber products, which was down by 20% from 2014.

The group does not ship other dry bulk commodities like iron ore, coal or grains. Miri-based Syscorp’s key shipping business is in containerised cargo and crude palm oil (CPO).

Ling considers CPO shipments to be more profitable than dry bulk transportation. The group operates three CPO tankers, servicing the Malaysia, Indonesia and China routes.

On container shipping, he said the business was still tough going as freight rates had remained stagnant. Stiff competition for cargo has continued to put pressure on the rates.

A market leader in container transportation in Malaysia, Syscorp laid off three container vessels after ceasing the unprofitable regional operations more than a year ago, and shifted its focus to domestic routes. The group owns and operates a fleet of 14 container ships plying Sarawak, Sabah and Peninsular Malaysia ports and coastal towns.

For the financial year ended June 30, 2015 (FY15), Syscorp group transported 108,218 twenty-foot equivalent units or TEUs, which was a 13% increase from 95,456 TEUs in FY14.

Asked if the implementation of the Pan Borneo Highway project would benefit local shipping firms in terms of the shipment of road construction materials, Ling said this had yet to materialise as some of these materials were currently transported by road.

So far, four of the 13 work packages of the highway project have been awarded. The Sarawak portion of the project is estimated to cost RM16bil, of which a significant chunk is reported to be on the cost of road construction materials.