Malaysian Bulk Carriers sees cautious outlook ahead

Cautiously optimistic, poised to meet the challenging economic threats.

MBC will continue to capitalize on its key strengths in commercial management in dry bulk shipping, technical expertise, digital capabilities and stay grounded on its core business to maintain a healthy balance sheet.  

While dry bulk freight rates periodically hit historical highs in 2021, Malaysian Bulk Carriers Bhd (MBC) remains cautiously optimistic as it continues to monitor the Covid-19 pandemic-related impact on the global economic outlook and geo-political tensions, said chairman Datuk Mohd Zafer Mohd Hashim.

“Depending on how the pandemic evolves and the unfolding Ukraine-Russian conflict, it is imperative for MBC to exercise prudence when exploring new strategic business opportunities and focus on strengthening business resilience and agility while augmenting its financial position in 2022,” he said in the company’s 2021 annual report released to Bursa Malaysia recently. 

As of December 31, 2021, MBC, the largest drybulk shipowner in Malaysia, owns and operates a total of five vessels with an aggregate carrying capacity of 339,665 metric ton deadweight and an average age of 5.5 years. 

CEO Hor Weng Yew said MBC will continue to capitalize on its key strengths in commercial management of dry bulk shipping, technical expertise, digital capabilities and to stay grounded on core business to maintain a healthy balance sheet.  

Hor said in 2021, MBC saw a very buoyant dry bulk market with freight rates soaring to historical highs mainly due to pandemic-induced disruptions, quarantine measures, supply-chain constraints, geopolitics, port congestion and elevated demand for core commodities. 

“The euphoric sentiment of the previous year has since been tapered by a more cautious outlook for 2022 given the increased geo-political risks and global economic uncertainties.

Following the unfolding Russian-Ukraine crisis, we are monitoring the situation closely as the geopolitical tension might potentially stall the global economic growth as the world battles against inflation and the risk of possible stagflation,” Hor said in the company’s 2021 annual report.  

While charter rates underline the current strength of the market, Hor said the prospect of a slower than expected economic recovery could weigh on dry bulk freight rates in 2022. 

“Shaping our business strategies in accordance with emerging trends in the ever-changing business climate enables us to stay ahead of the competition,” he said. 

According to Hor, the global economic recovery and the rebound in the dry bulk market last year have seen freight rates hit decade-highs. MBC recorded the highest operating profit in 11 years which was achieved with an increase in charter rates despite lower ship days. 

The Group has adopted a combination of fixed and floating index rate charters on the Supramax vessels, and spot/short-term charters on the Kamsarmax vessels. leveraging improving market conditions as well as to secure stable earnings during the year. 

“Although we could see the aftermath effects of Covid-19 waning, uncertainty still prevails with the unknown impact arising from the ongoing Omicron wave. Our established risk management approach has enabled us to function with minimal disruption despite the myriad of challenges arising from the ongoing pandemic situation,” Hor said. 

Mohd Zafer said the global Covid-19 pandemic has compelled the company to relook at how the maritime sphere will change, emerging trends that will dominate the industry and what lies ahead. 

“We need to learn and adapt on the fly with a sharpened focus on recovery amid headwinds and uncertainties in the dynamic business landscape. MBC is closely monitoring the war’s potential impact on economies globally to prepare itself for any uncertainties.” Mohd Zafer said.  

He believed the MBC Group is poised to meet the challenging economic threats as well as to seize opportunities amid pandemic recovery. 

MBC reported a net revenue of RM181.09 million (US$41.17 million) for 2021, 38 percent higher than RM130.85 million in financial year 2020, and a multi-year high operating profit of RM93.01 million.

Hor said the accelerated recovery in the dry bulk space due to the post COVID-19 global trade recovery has bolstered MBC’s financial performance for financial year 2021. The increase of 111 percent in charter rates (FY2021: USD18,092/day vs FY2020: USD8,566/day), redelivery of loss-making chartered-in vessels and lower operating expenses attributed to the increase in MBC’s operating profit. 

Hor also said that MBC is stepping up its efforts to integrate sustainability into its core strategies and business operations in line with the carbon emissions reduction goals set out in the IMO (International Maritime Organization) Initial Strategy.

“Energy efficiency is the cornerstone for building a green economy and active operational measures are underway to achieve fuel savings in our operations,” he said.  

MBC’s Kamsarmaxes are environmentally friendly and fuel-efficient green vessels, and its entire fleet are equipped with the IMO approved Ballast Water Treatment System to prevent the introduction of non-native marine microorganisms. 

Moving ahead, MBC will continue to stay on top of the changing international environmental requirements to enhance its vessel efficiency and environmental performance. 

“Most importantly, we will continue to embed sustainability practices in all aspects of our operations and core business strategy in our pursuit to conserve the environment and marine ecosystem,” he added. 

Photo credit: iStock/ nielubieklonu

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