MISC to quit the liner business
November 25, 2011
Malaysian shipping giant MISC Berhad is to quit the liner business because of deteriorating conditions in the market.
The operator said it had lost US$789 million in the marketplace in the past three years, and that its exit would cost it $400 million – a charge it would take in this financial year and exit the liner trades in June 2012.
CEO Datuk Nasarudin Md Idris said: “In view of the expected larger demand for investment in the liner industry, the cost for us to remain relevant in the business is untenable.”
The exit underscores the fast-deteriorating conditions in the container trades. MISC announced its intention to restructure its liner business in January 2010, when it pulled out of the Asia-Europe trades and decided to focus on the intra-Asia market.
The plan, MISC said, was to build scale in intra-Asia trades and review the disposal of “sub-optimal assets” in its liner business.
Instead – given the rapid collapse of rates and growth of overcapacity, even in the intra-Asia trade lanes – the company has decided to throw in the towel and focus on its core businesses, which include energy transport.
What changed its mind, MISC said, was “the rapid pace at which the industry is changing, led by the push for new investments into even larger vessels in order to maximise economies of scale and to realise greater cost efficiency”.
The phrase is a direct reference to the deployment of bigger ships by Maersk, MSC and CMA CGM on the Asia-Europe trade lanes, which began earlier this year.
This trend, MISC said, “comes at a time when the industry is being plagued by overcapacity and operators are struggling to stay profitable”.
According to a report in IFW’s sister paper, Lloyd’s List, MISC also said that the decision to exit the liner business had been hastened by generally difficult operating conditions in shipping.
Leaving the liner business will mean selling ships, withdrawing from trade alliances and ending service contracts. MISC estimated the one-off costs at around $400 million.
Courtesy of IFW
