Smooth Sailing Ahead for Ports, Shipping In 2020

Updated: Jun 16

Boosted by global trade investments in the manufacturing sector that generate tremendous inbound and outbound throughput for ports, Malaysia is set to see resilience in its shipping and port industry as we enter 2020.


The team at AmInvestment Bank Bhd (AmInvestment Bank) noted that there have been significant relocations of the manufacturing bases by multi-national companies out of China to the region due to the rising labour and land costs, exacerbated by the US-China trade war.



An added competitive advantage of seaports in Malaysia is its low port charges, bolstered further by a weak ringgit,” it detailled in its 2020 strategy report. “Global shipping lines will have to step up their cost-cutting initiatives on the back of slowing business amidst a global economic slowdown.



Not helping either is the much more stringent IMO 2020 sulphur cap (sulphur content of fuel used) that came into effect on 1 Jan 2020, exerting further upward pressure on operating cost of shipping lines.



The growth in local seaports will be underpinned by expansion plans, such as a new liquid bulk jetty and eight new container terminals that will double its handling capacity from 14 million to 28 million TEUs by 2040, and new triple-E cranes and development of autonomous driving terminal tractors at Pelabuhan Tanjung Pelepas (PTP).”



This optimism was shared by the team at MIDF Amanah Investment Bank Bhd (MIDF Research) who affirmed that container throughput should remain on an upward trajectory.

Despite uncertainty in regard to global trade, ocean trade has demonstrated growth as shown in container throughput recorded by Malaysia’s major ports,” it said in a separate note.



In 9MFY19, Port Klang’s Westports Holdings Berhad and PTP recorded a 15.7 and three per cent year on year (y-o-y) growth in container throughput respectively.



It is notable that despite the contraction in Malaysia’s trade figures this year, it was caused mainly by E&E exports which are normally transported via air freight. In contrast, we opine that seaborne trade which transports capital goods, textiles and footwear will remain resilient compared to air trade, in line with DHL’s Global Trade Barometer.”



Looking ahead, MIDF Research believed that strength within the Asean economy as seen in positive trajectory of nominal GDP of other peers such as Vietnam and Thailand will contribute to intra-Asian trade.



Aside from that, the implementation of the IMO2020 Sulphur Cap is expected to spur the transhipment volumes especially at PTP as shipping liners will want to mitigate higher operating expenses from more expensive fuel.



We remain optimistic on Malaysian ports given their strategic location along major trade lanes and the economic prospects of the Asean region. However, for the logistics industry, the anticipated higher demand of e-commerce activities will attract more new entrants,” it added.



As such, logistics companies are prompted to not only expand operations to capture the high demand, but also revise their rates offered to customers reducing margins.



Meanwhile, for energy transporters, the outlook of the petroleum tankers will be dependent upon the output cuts from OPEC members and sanctions imposed on vessels flagged by the US. This could suppress tanker rates moving forward. All factors considered, we reiterate our neutral stance on the transportation sector.”



Source: The Borneo Post