South East Asian ship owner bucks the trend during global
downturn through its long-term diversification strategy and a
conservative approach in sales and purchase market.
Not many dry bulk shipping groups have managed to
successfully chart a path through the freight rate turbulence that
has beset the sector over the last 18 months.  But while a
number of operators have now gone bankrupt and others have
been terminally wounded by investments made at the market’s
peak, others are poised to emerge from the fray bearing no more
than a few minor scratches.  Thoresen Thai Agencies (TTA) is
firmly in the latter category.
The Bangkok-based company has played the Sales & Purchase
market with some aplomb for the last two years and is also now
benefitting from its long-term diversification strategy.  In recent
years this has seen it establish a sizeable presence in the offshore
market via its shareholding in Mermaid Maritime.
This year the company has shown increased ambition further,
investing further up the bulk supply chains its serves with its bulk
carriers by moving into coal trading and fertilizer production (see
box on p91).
The TTA group reported a Baht 352.62 million net profit in
the third quarter ending 30 June 2009 and a net profit in the nine
months to 30 June 2009 of some 1,348.90 million.  Although
volumes were over 50% lower than a year earlier as TTA cutback
on capacity, shipping activities provided a net profit of Baht
321.88 million in the period (excluding exchange losses),
compared to the Baht 97.17 million loss racked up the previous
question of vessel delivery delays and cancellations, that a
traditionally volatile market is even more volatile.
“Key economies are not out of the woods yet even if rates
did come back again in autumn.
“The next 12–18 months will be difficult for the bulk sector in
my opinion.”
So far, he said, rates for vessels in the Supramax to Handysize
range in which TTA is active had remained relatively isolated
from the tremendous oscillations apparent in the Capesize
“We operate closer to the margins so the wins are not as
sweet but the losses are not as painful.”
However, while he was confident about forward demand for
bulk shipping, with steel production in China picking up, coal
demand from India remaining strong and agricultural markets
looking promising, the supply side of the equation was a different
“The big question is the amount of tonnage due to come on
line through 2010 and beyond,” he said. “It’s very difficult to know
how much will enter the fleet and when, so for now we’re just
concentrating on what we can control, which is our own costs,
our ships, where they are and the rates that we achieve.”
David L Ames, director of TTA’s transport group, told DCI
keeping a lid on operating costs had been critical to retaining
profitability. TTA had also benefitted from its conservative
attitude in the charter and purchase markets during 2007 and
2008 at the height of the dry bulk rates and vessel valuation
“We had the good fortune of a conservative approach to
newbuilding and long-term chartering in 2007 and early 2008
when it was deemed that both vessel prices and charter hire
rates were simply too high, unreasonably high,” he said.
“Therefore, Thoresen ceased taking on new vessels and pulled
back from long-term chartering.”
As of early November, TTA’s fleet totalled some 35 owned
vessels and seven vessels on charter consisting of a mix of pure
given time some 30% of shipping capacity is deployed on TTA’s
liner service which sails 9–11 times each month between China,
South East Asia and the Arabian Gulf mainly carrying breakbulk,
steel and minor bulks.
The rest of the fleet is used for period or spot charters or
for TTA’s own Contract of Affreightment (COA) coverage.
“I think with the current high volatility in the market, we’ll try
to weather this through by putting some of our fleet under
longer term contracts for which the rates must be reasonably
profitable,” he explained.
“Having said that, we don’t want to jump in now as we still
see upside on the spot market.  Where that takes us with the
liner trade remains to be seen.  We are being challenged by
container lines, so one has to be very aggressive in keeping costs
to a minimum.”
Part of the cost control process implemented by TTA, nine
older vessels in the 18–23 year age range sold or scrapped over
the course of this year.  Chartering activity has been reined back
and a centralized procurement system for ship parts has been
The company’s Singapore-based ship management operation is
also in the process of being moved back to Bangkok, and TTA
plans to recruit more Thai seafarers in preference to paying for
agency ratings and officers from the Philippines to cut crewing
The cutbacks are not, however, preventing TTA from renewing
its fleet. Five newbuildings will be delivered from January next
year through to early 2012 with an average size of 53,000 dwt
from Oshima yard in Japan and Vinashin in Vietnam.
Ames said the company was also keeping tabs on the
secondhand market for quality tonnage in the 5–10 year age
“Whether it’s the second hand market or options on
cancelled orders, we don’t have a preference as long as it’s a
good quality vessel from a good yard, at a price that gives us a
positive IRR going forward,” he explained.
Ames said the last 12 months had seen unprecedented flux in
the bulk carrier markets, but after five years of highs a correction
was due.
“Now the market is trying to find equilibrium,” he said.
“There are so many variables at work, not the least of which is