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The outlook for container companies in Taiwan will remain bleak for at least the next two years, according to a report by Merrill Lynch.

 'Despite growth forecasts of 8 to 10 per cent a year between 1997-99, container freight rates are expected to remain under pressure as an unprecedented amount of container capacity will likely be delivered between 1997-98. We do not expect freight rates to recover before 1999,' the report said.

 Major container operators, including Evergreen Marine, Yang Ming Marine Transport and Wan Hai Lines, are set to remain in the doldrums until freight rates pick up.

 But dry-bulk shipping firms face a far brighter future with significant rate rises forecast next year and in 1999, although rates are expected to remain flat this year.

 'We expect average daily rates for Capesize vessels to rise 20 per cent year on year in 1998, and 15 per cent year on year in 1999,' it said.

 This means bulk operators should be able to raise their rates to an average of US$17,000 a day in 1998 and $19,300 a day in 1999.

 Merrill Lynch said Sincere Navigation should be one of the main beneficiaries of these increases because 80 per cent of its fleet is Capesize.

 Demand for Capesize vessels in Taiwan is set to grow by 3 per cent a year, but the number of new vessels being commissioned is rising by just 2 per cent, the third lowest rate in 20 years.

 With about 22 per cent of the fleet more than 20 years old and the likelihood that two million deadweight tonnes would be scrapped each year, the number of available vessels would decline further. These two factors alone should push rates up by 5-10 per cent next year, the report said.



Merrill Lynch sees bleak times for Taiwan