Pressure to scrap vessel plans

"The cancellation of orders will lead to forfeited deposits which shipowners will have to pay out of their dwindling profits," said Ruth Banomyong, an associate professor in the Faculty of Commerce and Accountancy and director of the Centre for Logistics Research at Thammasat University.

The oversupply of dry bulk carriers would weigh down on freight rates, he told a seminar on improvement for the container and logistics business organised by Trade Ship (Thai). Shipowners would make losses immediately once the newly delivered vessels were launched into the sea, he said.

This year would be the most difficult for operators in the container and logistics industry, he said. As 80 per cent of world merchandise trade by volume is transported by sea, the logistics industry will suffer the most from the outbreak of the global recession.

Early last year, all shippers enjoyed the spike in freight rates, which metamorphosed into a "historic slump" in the third quarter.

The collapse of freight rates would be good for users only in the short run. But it would be bad for shippers in the dry cargo freight market in the long term, he said. Then, this will lead to lower prices for delivered goods and also would indicate reduced demand for products and shipping services.

Logistics users, especially exporters and importers, will start demanding for more integrated logistics services, he said. Therefore, "open-book" costing, which lets customers see the real cost of transport, would be a new trend among logistics services providers (LSPs). The LSPs' core income is derived just from management fees charged on top of transport costs.

Open-book costing could be applied to the transporting of commodities. It is mostly used in consumer product transport, he added.