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Maybank IB: Impact of Red Sea Conflict on Malaysia Minimal But Some Shipments May be Delayed

The ongoing conflict around the Red Sea would have minimal impact on Malaysia’s sea freight companies but some shipments of certain goods could still expect delays and higher freight costs, Maybank Investment said in a note issued yesterday.

“The impact to Malaysia is minimal as compared to the European countries, which depend heavily on Asian exports; they thus need to bear the brunt of higher shipping costs,” the note said.

“Malaysian exporters generally face minimal disruption, with moderate freight cost increases. But, some importers (in the chemicals, machinery, and automotive industries) face supply chain delays, affecting their production timelines.”

Since November, Yemen Houthi rebels have repeatedly targeted ships in the Red Sea over Israel’s offensive in Gaza but there are allegations that they have frequently targeted vessels with tenuous or no clear links to Israel, imperilling shipping in a key route for trade among Asia, the Mideast and Europe.

In recent weeks, the United States and the United Kingdom, backed by other allies, have launched airstrikes targeting Houthi missile arsenals and launch sites for its attacks.

The ongoing conflict has sparked fears that it could plunge the region into a full-blown war and drag down growth when the global economy is still reeling from Russia’s invasion of Ukraine, but signs that could happen remains unclear.

Malaysian ocean freight companies have also raised concerns about the prospect of having to raise prices as the conflict forces vessels to take a longer route and create a bottleneck.

Ooi Lean Hin, managing director of MTT Shipping and Chairman of Shipping Association of Malaysia, told the audience in a webinar organised by Maybank Investment earlier this month the impact of the conflict has been minimal thus far.

MTT Shipping is the largest shipping liner in Malaysia, ranked among the top 100 containerised liner operators globally.

Maybank Investment rated its latest outlook of the Malaysian shipping industry “positive”.

“We maintain our BUYs for MISC and Westports. The Red Sea Crisis will minimally impact MISC due to its focus on long-term charters. Westports has experienced minimal traffic slowdown in 1H of January, with traffic stabilizing as shippers adapted to longer routes,” the bank said.

Source: Malay Mailw

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