TTA prepares strategy to face freight rate decline in the future

The freight rate is expected to ease in the future due to high competition in the dry-bulk shipping industry, the firm said.

TTA managing director ML Chandchutha Chandratat yesterday said several experts as well as researches predicted the freight rate of dry-bulk shipping would ease by 50 per cent in the next two years after new ships enter the market, creating a glut.

Fearnleys, a well-known resear-cher, predicted the number of new ships would grow by 12 per cent next year and 15 per cent in 2010.

However, global ship demand will rise just 5-7 per cent a year, he said.

"Although I believe the freight-rate trend will fall as several experts expect, TTA's earnings should still be good. Our business should not record a loss for the next few years as we will seek new businesses to maintain growth," he said.

ML Chandchutha said Mermaid Maritime, a subsidiary of TTA, which operates offshore services in Singapore, has a bright outlook because it can expand further.

In the second quarter, offshore service contributed 2.26 per cent of TTA's net profit.

Dry bulk shipping generated 94.52 per cent of its net profit.

At present, TTA is considering both domestic and overseas investment projects.

They are all related to transport. TTA might create new subsidiaries or take over existing businesses.

The firm at the moment has a cash flow of more than Bt10 billion for the new investment.

Although the freight rate is expected to fall, TTA has no policy to adjust the proportion of long-term contracts to secure revenue.

TTA will maintain long-term contract for no more than 30 per cent of its total shipment contracts, he added.

He said the dry-bulk business in the second half of its fiscal year from April to September is still positive.

The freight rate in the third quarter (ending in June) is expected to match that of the same period last year.

The freight rate was expected to fall in the last quarter due to seasonal adjustments.