Apr 17, 2009

Flexibility counts for Samudera

Samudera Shipping Line, the Singapore-headquartered liner arm of Indonesia's Samudera Group, is counting on fleet flexibility to see it through the dark days plaguing the boxship industry.

The sector is supposed to be mired in deep recession but Singapore-listed Samudera showed no signs of that when it posted its full-year results. Bucking the earnings trend among container operators, turnover at Samudera was up by 17%, while operating profits jumped 37% to $32.6m.

It was an impressive performance but executive director Dhrubajyoti Das cautions that the results were not indicative of the industry in its current state.

"Most container lines had a good first part of the year. It was only in the fourth quarter where the impact of the economic crunch began to be felt," he explained.

Das adds that since then, the boxship market has been feeling the pain, even in the intra-Asia and Indonesian domestic trades - Samudera's main area of operation - that until recently were generally regarded as relatively recession-proof.

When describing these markets, the picture Das paints may not be as bleak as the long-haul routes from Asia to Europe but it is clear that the situation in Asia still leaves a lot to be desired.

With 80% of its intra-Asia trade stemming from feedering, Samudera, like all other feeder operators in the region, has seen container volumes decline substantially. While he gives no figures, Das stresses that the intra-Asia feeder trade is driven largely by the long-haul trades, especially from Asia to Europe.

"The short to medium-term outlook for the Asian feeder business depends on consumption in Europe. That needs to resume before volumes will begin to climb again," he said.

But Das adds that the volume of non-feeder intra-Asia cargo is still increasing, albeit not at the same levels as before, and this is helping to mitigate the decline in feeder volumes.

He also points out that the Indonesian domestic container trade saw volumes and rates decline slightly during the first two months of this year.

Overall, however, Das believes the situation has more or less bottomed out and a slight improvement in volumes was noticed during March. "It has gone up but we don't know whether this will be sustained," he said.

Samudera, like any other carriers, is now operating in survival mode with its focus on getting through the tough times. But Das remains bullish on its prospects and says it acted quickly to counter the negative market.

"We were very proactive and did not hesitate to cut services when we saw that a negative situation could not be reversed in the short term," he explained.

The company ditched its China-to-India service last October and shortly afterward terminated its South Korea/China-to-Straits service. Then in January, it chopped its India-to-Middle East service.

Other services have been scaled back. For example, the company's Bangkok sailings have been cut from four to three per week.

"We acted quickly and decisively in order to reduce losses and where we have withdrawn vessels we continue to maintain a presence through slot purchases, which reduces our exposure significantly," Das said.

Samudera may have cut its services but so far it has managed to avoid laying up any ships. This is down to its 29-strong fleet mostly comprising chartered-in tonnage fixed on a mix of short, medium and long hires. As a result, the company has been able to reduce capacity by not renewing charters as they expire.

That may be bad news for vessel providers but it has gone a long way to helping liner operators cope with the box downturn.

In fact, Samudera only became an owner quite recently, when it acquired three feeder-size ships for its regional trades and two smaller ones for its domestic Indonesian business. The company also has two 1,740-teu newbuildings on order and is scouting the secondhand market for potential bargains. "We still have room for a few more purchases without losing the fleet flexibility we desire. We are looking for something in the 1,000-teu range. It is a good time to buy providing
the banks are behind you," said Das.

Das readily admits that the liner industry remains at the mercy of the global financial crisis. "It is the absolute lack of trade financing that is hurting us and until this situation improves on a global scale the situation will remain poor," he explained. However, he adds that steps taken by operators, such as the rationalisation of services, are beginning to show a positive effect.

By Jonathan Boonzaier Singapore