Marine paint firms face 30% demand fall

Plagued by a steep drop in freight rates and to a lesser extent a loss in volumes, shipping companies are saving on their maintenance costs.

As a result, the demand for marine paints – the waterproof coating used by ships to prevent rusting – has come down by about 30 per cent compared to the same period last year, said senior officials from marine paint companies.

The drop relates directly to ships using ports in the UAE for transit anchorage.

The officials blame the decline on the reluctance among shippers to spend on maintenance of ships rather than on a drop in the number of ships plying on high seas. "Shipping companies are spending less on maintenance and therefore we are having a tough time. The drop in volume of sales has been more than 30 per cent," said Hironori Tamura, Dubai-based General Manager with Chugkou Marine Paints (CMP).

CMP's warehouse in Dubai has a capacity of 200,000 litres of paints. The company receives two consignments of 600 drums – each of 20-litre capacity on a weekly basis, but Tamura said the company is finding it difficult to sell what it imports. "Our products are used at Fujairah port and the Dubai dry docks. There has been a 30 per cent decline in demand at both places," said Tamura.

There are about six marine paint companies operating in Dubai and the almost all are facing similar problems.

"Shipping companies are battling a steep fall of freight rates. And the drop in our sale volumes have lowered by almost the same percentage as the drop in freight rates," said a senior official of a European marine paints company.

Identifying the abysmally low freight rates as the primary challenge that the shipping facing today, top Dubai based shipping company officials said these rates must rise by about $2,000 (Dh7,346) a container for the shipping companies to sustain themselves and afford maintenance.

Freight rates dropped by close to 50 percent from a peak in July 2008 (when rates were propelled by the high fuel prices) to January 2009.

Senior shipping company officials said as of now, this rate must rise by at least 15 per cent from the prevailing levels to ensure a sound economic performance of companies in the third and the fourth quarter of 2009.

"Low freight rates remain our main challenge," Robbert van Trooijen, the Dubai based Chief Executive of Maersk West and Central Asia Limited recently told Emirates Business. Trooijen rued that the shipping industry reacted "irrationally" to the economic downturn and that it is "too fragmented" to make a sustained effort to ensure a rise in freight rates.

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