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Fri 21 Aug 2009, 09:46 GMT

MISC expects bunker price rise to hit costs


Malaysian shipping line says operating costs are set to rise on bunker price surge.

Malaysia International Shipping Corporation (MISC) Berhad, the leading international shipping line in Malaysia, is expecting operating costs to increase in the near future due to the recent surge in the price of marine fuel.

Speaking about bunker prices after the company's AGM on Wednesday, Chairman Tan Sri Mohd Hassan Marican said “It was US$700 a tonne in the middle of last year, (it then) eased to US$200 per tonne and now it is almost US$400 a tonne.”

In addition to rising bunker prices, the shipping industry has been affected by fluctuating freight rates due to the decrease in global trade. However, according to Hassan, MISC has been cushioned from the impact of volatile freight rates as around 70 percent of its business is under long-term contracts.

Yesterday, MISC released its financial results for the first quarter ended 30 June 2009. Excluding a loss on the disposal of ships, MISC Group recorded a profit before tax of RM282.0 million during the quarter ended 30th June 2009, which was 49.6 percent lower than the corresponding quarter's profit of RM559.4 million.

The reduction was mainly due to lower profit in Petroleum business and higher losses in Liner and Chemical businesses, the company said.

"The contraction of global trade is expected to pose challenges to the shipping industry as reflected by falling rates in petroleum and container shipping. However, the Group's earnings from long term charters in the LNG and Offshore businesses will cushion the Group from the downward pressure on rates as mentioned earlier," MISC said in a statement.

Earlier this week MISC Berhad entered into a joint venture agreement with Vitol Tank Terminals International B.V. to incorporate a joint venture company on an equal partnership basis.

The joint venture company, Asia Tank Terminal Limited, will hold a 100 percent equity interest in a 741,200 cbm oil terminal due to be built in Tanjung Bin, located in south-west Johor, Malaysia. The facility will be used to store fuel oil, middle distillates and light distillates.

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