LAST year was a reasonably good one for the shipping industry overall, with some parts doing significantly better than others. Prospects are less bright, however.

Major concerns include rising bunker costs, the slowing US economy, sub-prime woes and impending anti-monopolies regulations in Europe.

While cargo growth and rates have been good on most trades, the sharp increase in bunker prices towards the second half of last year was an unexpected cost that container lines in particular struggled to recover from shippers.

'This year in general has been good. Cargo growth to Europe, the Middle East and Africa have been satisfactory,' said Pacific International Lines managing director SS Teo.

K Line managing director Kenichi Kuroya meanwhile was pleasantly surprised that expected oversupply last year did not damage rates. 'Cargo growth mainly contributed by China exports had supported a good market in containers both for Europe and the US, as well as the North/South trades. In general this was a fairly good year after all,' he said.

NOL was similarly pleased with last year's performance. 'Ongoing strength in the world economy, together with continuing outsourcing of global manufacturing production to Asia, drove double-digit growth in demand for international container shipping services in 2007,' said corporate affairs vice-president David Goodwin.

He attributed the good performance to NOL's ability to position new capacity in sectors where demand growth was strongest, maintain high utilisations and yields and effectively manage costs, especially fuel.

'2008 will inevitably bring its challenges, with high fuel costs and question marks about the direction of the US economy being the industry's most talked-about topics.

But overall, we are anticipating continuing strong demand for imported goods in the established economies in North America and Europe, coupled with exciting growth in intra-Asia traffic,' Mr Goodwin added.

After October, big changes to European Union regulations governing the freight industry could have a major impact on the way lines do business. The shipping conferences which run much of the trade may not continue to enjoy their long-held immunity from competition law there.

Indications of the stance that regulatory bodies like the European Commission may take can already be seen in the ongoing global inquiries into the air freight arms of various major airlines including Singapore Airlines and Cathay Pacific for price-fixing of surcharges.

Slower global economic growth due to the stalling US economy and tighter credit conditions caused by the sub-prime loans problem are other factors that could hit the shipping industry, Mr Teo added.

The implications of stricter environmental standards on the shipping industry are also a major worry. An International Maritime Organisation (IMO) delay in a decision on the introduction of ballast water treatment equipment has given them a reprieve till at least April.

Meanwhile there are still rumblings from some quarters about a switch to distillate fuels from residual fuel oil, which will add significantly to costs should it be implemented. This will be exacerbated by the rising oil price which almost doubled to just under the US$100 level towards the end of last year.

For other segments of the industry however, 2007 was a stellar year. Dry bulk carrier operators are seeing unprecedented charter rates, which have more than doubled in the last year. The Baltic Dry Index is hovering around the 9,000 level, off its record highs of around 11,000 in mid-November but still more than double compared to the year before.

The rises are being driven by China's huge appetite for commodities, and to a lesser extent that of India as well. This has prompted operators to go on a buying spree, driving up the price of ships. Cape-size ships, the largest type of bulk carrier, have almost tripled in price to US$96 million from US$33 million in 1998.

There are concerns about the rapid increase in fleet sizes causing an oversupply. Other factors like port congestion and slowing demand for commodities will also weigh on the mind of these operators. This however has not ended the rapid expansion plans of some of them.

One of the world's biggest dry bulk players, Korea's STX Pan Ocean, recently announced a US$400 million buying programme. Companies like India's Mercator Lines are also investing in bigger ships like a Very Large Ore Carrier with a 280,000 dwt capacity specifically to serve the China market. The ship is to be delivered in the fourth quarter. Mercator also has two post-Panamaxes on time charter scheduled for delivery in the middle of next year.

The company remains bullish. 'Demand for dry bulk continues to be very strong across all commodities. China and India are likely to continue increasing their dry bulk trades, grains are travelling long distances (like from the US to Japan). Strong demand and limited supply is likely to keep freight rates buoyant,' said Mercator Lines managing director Shalabh Mittal.

'We expect Asian economies to continue to do very well in terms of increased demand for commodities. Iron imports into China, coal imports into India, grain imports into Japan are all likely to register good growth levels,' he added.

Last year also saw Singapore gaining a reputation as an international maritime centre. Since Pacific Shipping Trust became the first shipping trust to list in 2006, two more - Rickmers Maritime and First Ship Lease Trust - have also listed on the Singapore Exchange.

More shipping and shipping-related firms are also choosing to list here.

Recent IPOs include Mercator which saw its debut on the mainboard earlier last month while others like integrated shipping company Marco Polo Marine listed on Sesdaq in November.

The growing voice of Asia in shipping and Singapore's central role in developing it was boosted by the setting up of permanent office for the Asian Shipowners Forum here last year. The body represents almost half the world's cargo carrying fleet.

And finally on the cruise front, while major cruise operator Royal Caribbean has committed to using Singapore as the home port for its giant Rhapsody of the Seas here for two seasons, the inability of the ship to dock at the Singapore Cruise Centre spurred the Singapore Tourism Board to announce that it plans to begin work on Singapore's second cruise terminal in Marina South this year.

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