Elevated tanker and freight rates globally are reinforcing profitability across the shipping sector, turning vessel capacity into strong earnings generators amid continued supply constraints, industry players said.

Orkim Bhd executive director and chief executive officer Captain Cheah Sin Bi said the current rate environment is supporting earnings strength across tanker operations, while disciplined chartering structures remain key to managing volatility.

He said the company mitigates market swings through a diversified chartering strategy spanning time charters, consecutive voyage charters, contracts of affreightment (COA) and spot voyages. This structure provides both earnings visibility and the flexibility to capture upside during market upturns.

Cheah said the mixed portfolio of charter contracts shields Orkim from extreme market volatility while allowing the company to benefit from stronger pricing conditions.

While cost pressures, particularly fuel and insurance, remain elevated, he noted that contractual safeguards such as bunker adjustment clauses enable the company to pass through fluctuations in global oil prices.

Under time charter arrangements, charterers bear 100 per cent of bunker and port costs, while CVC and COA structures incorporate periodic rate adjustments tied to fuel price movements, providing strong cost visibility and margin protection.

Similarly, MTT Shipping and Logistics Bhd managing director Ooi Lean Hin said geopolitical tensions around key chokepoints, including the Strait of Hormuz, have increased fuel costs but also strengthened the case for structured surcharge mechanisms across the industry.

He said rising fuel costs are mitigated through bunker adjustment factors (BAF), allowing the company to pass on these operational expense increases to customers, similar to emergency bunker surcharges introduced by major global liners.

Ooi added that MTT Shipping’s focus on domestic and intra-regional routes provides a more stable demand base, while its integrated business model enables optimisation of vessel utilisation across both liner and chartering segments.

“We leverage our bespoke vessels and specialised designs to carve out niche markets for ourselves, where we have the competitive advantage to expand our market share,” he said.

“In addition, our young and fuel-efficient fleet supports cost efficiency, and our flexible deployment strategy allows us to respond effectively to changing market conditions.

Ooi noted that these capabilities also position the company to future-proof its business as stricter regulations are imposed by the International Maritime Organization (IMO), such as the implementation of the Energy Efficiency Existing Ship Index (EEXI) and Carbon Intensity Indicator (CII) in January 2023.

Despite near-term volatility, Ooi said the company remains well-positioned to navigate the current environment and sustain its performance.

He said the cost of bunker fuel is one of the major components of the company’s direct costs for its container shipping operations and fluctuates according to the prevailing global oil prices.

“We manage such fluctuations by factoring in a bunker adjustment factor in our freight rates, in part as recovery costs to us for the fluctuation of bunker fuel costs, enabling us to pass on increases in bunker fuel cost to our customers,” he said.

Ooi said the extent to which the company can pass on higher costs ultimately depends on market conditions and the nature of the contractual arrangements.

“Our focus on domestic and intra-regional routes, where reliability, frequency, and service consistency are critical, supports our ability to maintain pricing discipline and negotiate sustainable rate structures with customers,” Ooi said.

“More importantly, given our longstanding involvement in the business, we have established ourselves as Malaysia’s leading container liner operator with a relatively young and fuel-efficient fleet that provides us with a structural cost advantage, helping us to achieve cost leadership and protect margins,” he said.

Source: New Straits Times