MISC Berhad, showing strong frustration at the tough fundamentals in global container shipping markets, is withdrawing from the container business in 2012 to focus on its bulk and energy sector operations.
The Malaysian carrier, a niche operator with 30 owned and chartered container ships, is the largest carrier so far to fold operations amid what MISC says are dramatic shifts in liner industry economics and deep rate discounting.
“The radical change in the operating dynamics of the liner industry, which is driven by high operating cost and rapid changes in global trade patterns is challenging the validity of today's operating models,” the unit of Petronas Shipping said in a statement.
MISC is one of the few maritime operators to report a profit this fall, but its net earnings were off 62 percent in the quarter ending Sept. 30, and the carrier pointed at the many orders for mega-ships, up to the vessels with 18,000 20-foot-unit equivalents capacity, as a major force driving smaller operators from the market.
“With the pursuit of size being the center of this change, leading operators are now testing the size limits of vessels in order to maximize economies of scale and realize greater cost efficiency,” MISC said. “This push for investments in larger vessels comes at a time when operators are struggling to stay profitable with a depressed freight rate environment, which is not expected to improve any time soon due to the continued heavy delivery of new container vessels.”
Datuk Nasarudin Md Idris, MISC’s president and CEO, said the company would focus instead on its other maritime operations that offer better prospects for profit. “In view of the expected larger demand of investment in the liner industry, the cost for us to remain relevant in the liner business is untenable," he said.
MISC said it will take until June 30, 2012 to pull out of its various trade alliances, drop vessel agreements and charter contracts and sell assets related to the liner business.
The withdrawal will lead to one-time costs of $400 million, the company said.