Back to index page

Turning tide lifts most boats

But Thai Airways drags sector down

A combination of higher freight rates, lower interest rates, and foreign-exchange gains are expected to provide a silver lining for Thai shipping companies into next year, while global tensions are likely to continue affecting the national airline.

The Thai shipping industry is projected to build on its healthy performance in 2001, particularly due to higher dollar-denominated freight rates for small vessels.

"As most of the Thai companies operate small vessels or handysize ship types averaging 10,000 to 25,000 dwt, handling minor bulk shipments including rice, sugar, fertiliser and minerals and steel products, the industry is unlikely to be much affected by the world economic slowdown," said M.R. Chandram S. Chandratat, the chairman of Thoresen Thai Agencies.

Among the listed transport firms, Thoresen Thai led with a one-year return of 133.3%, followed by Unithai Line at 70%. Thai Airways trailed at -23.4%, and its sheer size pulled down the total sector score to -17.8%.

M.R. Chandram forecast freight rates for small vessels would remain steady into next year, though rates for large vessels with over 80,000 dwt capacity would drop to an average of US$8,000 per day from $30,000 because of the global slowdown. Post-Sept 11, there has been a sharp decline in demand for large cargoes such as iron ore and coal.

Freight rates for 20,000-dwt vessels are now at $3,000 to $4,000 per day compared with a low of $2,000 in the last four years and highs of $9,000 to $10,000 before the Asian crisis.

He said that normally, the impact on freight rates for small vessels was not felt until about six months after changes in rates for larger ships.

"The freight rate for small vessels is likely to remain stable at US$3,600 to $3,800 a day until next year," he said.

The local shipping industry has turned the corner after four years of weakness, as evidenced by the profitability of most listed shipping firms.

Thoresen posted a net profit for its full financial year ending Sept 30 of 329.97 million baht, compared with a net loss of 78.42 million in the same period last year. Unithai Line reported a nine-month net profit of 315.12 million baht, against a net loss of 187.92 million a year earlier.

Regional Container Lines' nine-month net profit was 587.79 million baht, up from 157.74 million a year earlier. Precious Shipping Plc had a net profit of 571.13 million baht compared with a net loss of 421.62 million.

Shipping carriers also expect short-term gains as some clients switch from air-cargo services to ocean transport due to concern about aviation safety.

As well, shipping firms could gain as some countries try to hoard or build up stocks of essential materials, such as food grains and animal feed ingredients, to avoid any blockages or possible port shutdowns in exporting countries.

Despite a positive sector outlook, Thai Airways is likely to struggle along with its counterparts worldwide.

"The US attack will definitely remain a factor affecting the national carrier," said Kitichan Sirisukarcha of Yuanta Securities. "But the most important thing for THAI to overcome next year will be its dollar-denominated debts which now make up for over 60% of its 100 billion baht in liabilities."For the financial year ending Sept 30, THAI made a profit of 1,929 million baht, a year-on-year decline of 59.1%.

THAI plans to cut costs by two billion baht in the current fiscal year. It has cut loss-making flights, frozen hiring and investment, and recently closed seven of its eight North American offices.

Mr Kitichan said that apart from debt restructuring, fuel prices and service efficiency also would be important factors. "Lower sales will affect the company only slightly, if it could achieve gains in converting dollar debts into local currency."

- Charoen Kittikanya