Malaysian shipper MISC Bhd expects freight rates for crude oil to remain soft over the next two years as competitors put more new tankers to sea, Reuters reported.
MISC earns 90 percent of its profits from shipping oil and liquefied natural gas. A subsidiary of state oil firm Petronas, it is the world's largest carrier of LNG.
LNG is shipped under long-term contracts, but MISC still faces significant exposure to oil freight rates, with crude oil tankers accounting for 40 percent of its profits.
The International Maritime Organization requires single hulled tankers to be phased out by 2010 to reduce the risk of oil spills. But the move has yet to make a dent in the world's fleet of oil tankers as more new tankers are launched.
The Baltic Exchange's Dirty Tanker Index stands about 60 per cent lower than its historic peak in November 2004.
Analysts have said a glut of new tankers expected in the next three years could depress rates even further and hurt profits of shippers such as MISC.
Shamsul said container rates were also likely to weaken as shipping capacity outstripped growth in
container traffic.
The container business, which accounts for nearly 30 percent of group revenue, made a loss for the six months ended September 30. But MISC's
core LNG business is likely to cushion some of the blow from weak freight rates.
Shamsul declined to give a profit outlook for the current year but noted that operational profits had increased slightly.
MISC, owned 62 percent by Petronas, posted an 11 per cent rise in net profit for its second quarter to September 30, helped by its engineering unit, which builds offshore oil-and-gas platforms. Shamsul said the unit was well placed to win more projects.
MISC's net profit fell 38 per cent to $826m in the year ended March 31, 2006.
MISC's 22 LNG tankers account for about a 10th of total world LNG capacity.
Source: Reuters