Harbour-Link expects challenges for domestic freight rates
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Harbour-Link expects challenges for domestic freight rates

By In News On December 18, 2023

KUCHING: Domestic ocean freight rates are expected to come under pressure with new shipping players entering the market.

According to Sarawak-based Harbour-Link Group Bhd, domestic freight rates may encounter headwinds due to additional players coming into the market.

These new players, said the company, contribute to increased shipping tonnage capacity that create competition on the freight rates.

As such, Harbour-Link anticipates this trend to impact the group’s revenue going forward.

Harbour-Link provides container shipping liner service within the Malaysian and intra-Asia market.

The group owns and operates a fleet of 13 container vessels with a total capacity of 6,150 20-ft equivalent units.

After enjoying a shipping boom in the last three financial years, Harbour-Link’s group net profit in the first quarter ended Sept 30, 2023 (1Q24) plunged by more than 50% to RM16.1mil from RM39.2mil in the previous corresponding period, as revenue shrank by 22% to RM206mil from RM264.1mil.

The company blamed the significant drop in earnings in 1Q24 (the lowest quarterly earnings recorded in nearly three years) to the stiff competition, with major container liner operators who have deployed additional tonnage into the region.

This is particularly in the intra-Asia routes, which caused the squeeze on freight rates.

Harbour-Link saw its group net profit doubled to RM60.6mil in the financial year 2021 (FY21) from RM25.9mil in FY20.

Revenue grew to RM609.6mil from RM617.3mil previously, as a result of a strong recovery in freight rates and increased utilisation of shipping capacity brought about by the impact of the global Covid-19 pandemic.

The group’s net profit soared further to RM149.7mil on sharply higher revenue of RM907.5mil in FY22, before weakening slightly to RM147.8mil on turnover of RM1bil in FY23.

Executive chairman Datuk Yong Piaw Soon attributed Harbour-Link group’s strong earnings to the boom enjoyed by the global industry, with container freight rates indexes toppling US$5,000 per 40-ft container in February 2021, after climbing steeply and steadily from May 2020.

“Harbour-Link container liner services plying between intra-Asia and East Malaysia routes had drastically lowered the freight rates since December 2022 to the extent of 55%,” the company said in explanatory notes to its 1Q24 financial results.

With the upcoming festive seasons (Christmas and Lunar New Year), the group expects cargo volume to increase and raise the utilisation rate of its shipping capacity that may keep the freight rates stable.

On the outlook for the Intra Asia market in FY24, Yong expects ocean freight and shipping charges to weaken slightly due to lower cargo volume and increase in shipping space, mainly due to the expanding capacity from competitors in the routes serviced by Harbour-Link.

“While China’s reopening remains supportive of the global economy, the slower-than-expected pace of recovery in recent months will weigh on global growth.

“Domestic shipping between Sabah and Sarawak and the Peninsular Malaysia is more stable with consistent cargo volume and favourable freight rates, due to expected growth for the domestic market which is supported by domestic demand.

“This is underpinned by favourable labour market conditions, particularly in the domestic-oriented sectors,” he added in the company’s 2023 annual report.

Another Sarawak-based shipping firm Shin Yang Group Bhd (formerly Shin Yang Shipping Corp Bhd) had also reported weaker earnings in the July to September 2023 quarter, as the group’s net profit shrank to RM26.1mil from RM50.3mil a year ago, in tandem with the drop in revenue to RM222.4mil from RM247.3mil.

Shin Yang said group earnings had fallen because of declining freight margin and cargo shipment volume reported by both its containerised shipping and bulk carriers’ sectors.

Shin Yang operates a fleet of 16 container vessels plying between Peninsular Malaysia and Sabah and Sarawak.

Two of these vessels service the Sarawak-Singapore routes. The group has also converted two tug-and-barges to transport containers for shorter routes to ensure there is no shortage of shipping spaces.

The group is also into shipment of dry bulk cargoes such as timber products, quarry, aggregate, sand, equipment and machinery between ports in Sarawak and Sabah, Port Klang, Brunei, Singapore, Thailand and Indonesia on a regular basis.

For international shipping, Shin Yang operates five double-decker cargo ships constantly plying routes to the Far East region.

In liquid bulk shipment, Shin Yang has an ongoing five-year contract of affreightment with PETRONAS Chemical Marketing (Labuan) Ltd to ship methanol products.

News Source: https://www.thestar.com.my/business/business-news/2023/12/18/harbour-link-expects-challenges-for-domestic-freight-rates

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