BUOYANT YEAR FOR PORT OPERATORS, SHIPPING INDUSTRY BUT CHALLENGES PERSIST

By Harizah Hanim Mohamed

KUALA LUMPUR, Dec 18 (Bernama) -- It has been a strong year for ports in Malaysia as operators pushed ahead with capital-intensive infrastructure upgrading works and rode on the wave of e-commerce growth as well as rising global trade to maintain their competitiveness.

But there were also challenges confronting the maritime sector, foremost of which was increasing shipping costs, port and berth congestion due to skyrocketing cargo, as well as geopolitical tensions in the Red Sea region.

During the year, beyond infrastructure upgrades, several port operators were leveraging international collaborations to strengthen their position within global supply chains.

In September, Westports Holdings Bhd, one of the two operators at Port Klang and among the seven federal ports in Malaysia, held its ground-breaking ceremony for phase two container terminal expansion from terminals 10 to 17, which is a significant step towards strengthening Malaysia’s position as a global maritime and logistics hub.

Westports executive chairman and group managing director Datuk Ruben Emir Gnanalingam Abdullah said the construction of eight new container terminals will double Westports' container handling capacity from 14 million twenty-foot equivalent units (TEUs) to 28 million TEUs.

Elsewhere, smaller ports, namely Perak’s Lumut Port and Sabah’s Sapangar Bay Container Port (SBCP), were also expanding their infrastructure while embarking on joint ventures with international partners to become vital players in the global maritime and logistics landscape.

The Lumut Maritime Industrial City (LuMIC) feasibility study, set to redefine the region as a pivotal hub in Malaysia’s maritime industrial sector, will be formalised by early 2025. The study is  conducted by the Perak State Development Corporation and Port of Antwerp-Bruges International for LuMIC.

Meanwhile, SBCP, through the synergy between Dubai-based DP World Plc and Sabah Ports Sdn Bhd, is poised for integration into DP World’s global network, strategically enhancing its role within Southeast Asia’s archipelagoes and enabling it to leverage the region’s rapid export growth.

The partnership between the two companies reached a new milestone this year with the transfer of the port's management to DP World, executed under joint-venture company DP World Sabah Sdn Bhd.

On regulatory matters, a significant development was the formation of the Malaysia Maritime Law Revision Committee (MLRC), aimed at updating the Merchant Shipping Ordinance 1952 and related port acts to align with evolving industry practices, international standards, and treaties.

Malaysian ports are governed at the federal or state level. Federal ports, under the Ministry of Transport, are statutory bodies operating under the Port Authorities Act 1963.

These include seven major ports, such as Port Klang and Port of Tanjung Pelepas which rank among the world’s top 20 container ports.

State ports, such as those in Sabah and Sarawak, operate under state jurisdiction. Sabah Ports, managed by Sabah Ports Sdn Bhd and regulated by the Sabah Port Authority, are privatised.

In contrast, Sarawak ports remain under public port authorities like the Kuching Port and Rajang Port, whereas minor ports, governed by the Marine Department under the Merchant Shipping Act 1952, include fishing jetties and private terminals owned by oil companies and resorts.

Not all plain sailing in ocean trade

Port congestion remains a critical issue in global shipping, causing delays, increasing costs, and triggering ripple effects across supply chains.

Maritime scholar and commentator Nazery Khalid said key ports globally faced congestion as port operators, cargo owners and logistics service providers scrambled to clear the huge backlog of cargos held up at ports and along supply chains owing to the pandemic.

“Port operators are also hard-pressed to handle the spike in cargo throughput volumes resulting from the rebound in trade and economic activities post-COVID-19,” he told Bernama in an email interview.

The congestion issue peaked mid-year, with congestion at the Port of Singapore impacting Port Klang as liners diverted some port calls and an influx of containers and liners were redirected to Malaysia to avoid longer wait times in Singapore due to the maritime logjam in the island republic, which includes berth congestion and delays.

To address these challenges, Westports  implemented several measures, including streamlining gate operations to prevent yard overcrowding, prioritising vessels with higher loading volumes, and collaborating with importers and haulage companies to expedite container clearance.

Similarly, Northport adapted by accommodating 171 ad-hoc calls and welcoming 13 new services.

MMC Port Holdings Sdn Bhd's newly appointed chief executive officer (CEO) Datuk Azman Shah Mohd Yusof, previously Northport CEO, acknowledged the difficulties faced by Northport and the shipping industry this year.

“2024 has been challenging for the port and shipping industry, driven by global factors such as geopolitical tensions in the Red Sea region.

“These disruptions have significantly impacted global trade routes and port operations, prompting liners to make ad-hoc calls to other ports,” he was quoted as saying.

Even smaller ports have not been spared, recording high yard utilisation.

SBCP was reported to have experienced an 18 per cent growth in containers versus last year.

In early July, SBCP’s yard utilisation reached almost 100 per cent. It has dropped to 64 per cent due to measures implemented such as higher container stacking, reorganisation of the current layout to optimise operations, and increase in manpower to clear vessel backlogs that occurred in early July.

TEUs are skyrocketing

For Westports, the port’s operational growth has been driven by a higher container volume of 8.11 million twenty-foot equivalent units (TEUs) in the first nine months of 2024.

The port operator attributed this to container volume growth coupled with robust intra-Asia regional trade, which accounted for 66 per cent of the container handled.

In the conventional segment, Westport handled 9.02 million tonnes of bulk cargo, supporting domestic economic activities. The throughput included project cargoes, steel products, soybeans, maize, clinker/slag, and fertiliser.

Northport, on the other hand, continues to surpass its own milestones, consistently setting new annual throughput records in both its container and conventional cargo business segments.

As of Nov 27, 2024, Northport handled a total of 3.33 million TEUs, surpassing its previous annual record of 3.32 million TEUs set in 2021.

Northport also broke its conventional cargo record, handling 11.42 million freight weight tonnes (FWTs), exceeding the previous annual record of 11.41 million FWTs achieved in 2023.

Topsy-turvy 2024 for commercial shipping

While port operators celebrated record-breaking TEU milestones and focused on infrastructure expansion, the same optimism could not be extended to the shipping industry.

According to Nazery, freight rates surged in 2024 due to rerouting, port congestion and rising operational costs due to high oil prices and insurance costs.

“Shipowners rerouted vessels from the strategic energy sea lanes in the Red Sea and Gulf of Aden, which faced the threat of attacks from Houthi rebels and the risk of war escalating in the Middle East.

“They had to take the longer route through the Cape of Good Hope in the southern tip of Africa to avoid the Red Sea and war risk zones,” he explained.

Reports indicated that ongoing geopolitical tensions have resulted in longer shipping voyages, with vessels circumventing the Cape of Good Hope, effectively removing approximately 1.2 million TEUs from the global container supply.

The attacks on vessels in the Red Sea area reduced traffic through the Suez Canal, the shortest maritime route between Asia and Europe, through which about 15 per cent of global maritime trade volume normally passes.

These disruptions have caused the average transit time between Asia and the Mediterranean to increase by 39 per cent, exacerbating port congestion in major Asian and European ports.

Nazery highlighted that the owing to the disruption in shipping services and capacity crunch, freight rates spiked, and shipping companies enjoyed huge profits.

“This was especially notable in the container trade which facilitates a lion's share of global trade,” he said.

Outlook for shipping in 2025

Global shipping costs are expected to remain high next year, with freight rates likely to continue rising due to ongoing challenges in the shipping industry, including United States (US) President-elect Donald Trump’s tariff threats and the tensions in the Red Sea.

CMA CGM (Taiwan) Ltd managing director John Lim told Bernama that the targeted tariffs on China’s imports would push the country to seek new markets, leading to a shift in trade routes toward Europe, Southeast Asia and other regions.

“China faces an overcapacity issue, driving it to seek alternative markets amid tariff challenges.

“China’s competitive pricing, exemplified by its affordable electric vehicles (EVs), positions the country to shift trade flows toward Europe, Southeast Asia, Latin America and the Middle East if tariffs from the US and Europe limit its exports. This overcapacity and market realignment are reshaping global trade routes,” he said recently.

Meanwhile, DHL noted that China’s exports are currently exceeding forecasts, as factories rush to ship goods ahead of anticipated US tariff changes. This has resulted in full bookings on some container lines for routes from Asia to the Americas, as shippers move to pre-empt potential new tariff regimes.

Trump had on Nov 26 pledged to impose big tariffs on the US' three largest trading partners -- Canada, Mexico and China.

Both Lim and Nazery agreed that many of the key trends shaping the sector in 2024 will persist into the coming year.

“These include growing demand for container shipping services, shipping capacity expansion, operational challenges arising from volatile oil prices, high labour costs, and hike in insurance premiums due to geopolitical factors and changing carrier alliances,” Nazery added.

According to forecasts by several shipping consultants, global shipping capacity is projected to grow by eight per cent in 2025, driven by anticipated economic and trade growth.

However, demand for shipping is projected to grow at three per cent, which eventually points to overcapacity in shipping which will result in softer freight rates next year compared to 2024.

Nazery said the shipping industry would face several challenges in 2025 and thereafter, which include prolonged port congestion which will adversely affect the efficiency of global supply chains as well as shortage and imbalance of shipping containers.

They include disruptions in supply chains, which include conflicts, natural disasters, geopolitical uncertainties, trade wars, protectionist policies and the possibility of another global pandemic outbreak.

“Rising cost of shipping due to fuel price increase and shortage of ships amid growing demand for shipping services and changing regulatory requirements in areas such as environment, trade, labour, technology, safety, security and governance will continue to shape and reshape the shipping industry's operating landscape,” he said.

In addition to this, geopolitical tensions such as in the Middle East, the ongoing Russia-Ukraine war and the rising prospect of conflict in the South China Sea will have an impact on international trade and seaborne transport.

Meanwhile, the carrier alliance landscape is poised for significant changes, according to DHL Global Forwarding’s December 2024 Ocean Freight Market Update.

Among others, the 2M Alliance will dissolve next month, to be followed by the launch of the Gemini Cooperation between container lines Maersk and Hapag-Lloyd in February 2025.

THE Alliance will transition into the Premier Alliance, comprising HMM, Ocean Network Express and Yang Ming Marine, while the world’s largest ocean carrier MSC plans to operate its East-West network independently.

DHL Global Forwarding Asia Pacific chief executive officer Niki Frank was quoted as saying that shippers should expect some turbulence in the networks and services offered from February until the new networks are fully phased in.

-- BERNAMA