thegreglowe.com

By GREG LOWE
IN BANGKOK

PLUMMETING exports saw traffic through Thailand’s prime cargo port continue to decline last month, painting a dim picture for the country’s shipping industry this year. Experts warn that cargo volumes may decline by up to 25 per cent this quarter and 10 per cent over the year.

Laem Chabang deep sea port saw its traffic volume drop by 27 per cent year-on-year in January, following December’s 20 per cent contraction, the port’s first negative growth in its 18-year history.

The downturn led to an overall annual drop of 10 per cent to 750,000 twenty-foot equivalent units, the global volume benchmark for the industry. 2009 will continue the spiral downwards, analysts say.

‘Port authorities expect Laem Chabang’s traffic to fall by another 10 per cent this year,’ says Sirima Dissara, shipping analyst, KGI Securities (Thailand).

Thailand’s other major ports are facing a grim year. Trade at Bangkok’s Klong Toey port recently shrunk by 30 per cent, while Lat Krabang port traffic declined by 24 per cent.

Thai exports fell 14 per cent year-on-year last December, the worst results for 17 years, spelling bad news for shipping. Thailand is in a tough position as the majority of its imports are export-related.

‘Container volumes will continue to decline so long as there is a recessionary state in the world economy,’ Khalid Hashim, managing director of Precious Shipping, Thailand’s second biggest bulk carrier operator, told The Business Times. ‘Bulk cargoes have been similarly affected by the recessionary environment resulting in demand destruction.’

While the container business will be hardest hit by slumping consumer demand, the global financial crisis will hamper the industry further as access to credit remains limited.

‘The lack of letters of credit to finance trade has been the other big problem being faced by the bulk shipping industry,’ said Mr Hashim. ‘This will continue till the world’s banking system has been nursed back towards its former health.’

Thailand’s shipping capacity is running at 60 to 70 per cent, according to the Thai International Freight Forwarders Association which forecast overall port traffic to decline by 25 per cent in the first quarter.

Chinese demand for iron ore and a surge in the cape markets fuelled a recent rally in the Baltic Dry Index – the global barometer for shipping costs – which almost doubled last week from 774 points from the end of last year. But the market rebound will bring little long-term solace for the industry, experts say.

‘It is very difficult to make any sense of the BDI,’ said Mr Hashim. ‘Every time demand gets a bit hot the index will rise. However as economic growth in the world is at best very stunted, or at worst exhibiting negative growth, the chances for any form of sustained rally seems rather far-fetched.’

Laem Chabang is the world’s 21st busiest container port by volume, according to the American Association of Port Authorities. It is located on Thailand’s Eastern Seaboard industrial zone which has the highest gross regional product outside of Bangkok and its vicinities, at around 1.3 trillion baht per year (S$56 billion), according to the National Economic and Social Development Board.

Published February 12, 2009
© The Business Times