Source: Business Times
But economists downplayed the congestion as a result of longer supply chain lead times at Malaysian ports, saying that this is a temporary challenge that will not significantly affect Port Klang particularly.
“Yes, the Red Sea crisis will lead to longer supply chain lead times for trade between Europe and Asia. I don’t see much impact (though). That is part of logistics dealing with uncertainty,’ LLB International chief executive officer Dr Marco Tieman told Business Times.
“The Covid-19 pandemic has shown that it is dangerous to make supply chains too long and lean. So companies are sourcing closer by and are not dependent on just in time supply chains.
“These are temporary challenges. Malaysia has efficient ports and are located along one of the world’s busiest shipping lanes which will guarantee them good business for the years to come,” he added.
Tieman was commenting on the congestion at the Malaysian ports with ships reportedly taking up to an average of nine hours to dock at Port Klang.
Port Klang’s two key terminals namely Westports and Northport have seen a sudden surge in number of vessels re-routed due to the prolonged Red Sea crisis.
Port Klang Authority general manager Captain K. Subramaniam told Business Times late last week that as of April, the average berthing delay for container vessels at Westports is 9.3 hours and at Northport, it is 1.9 hours.
Port Klang is facing vessel bunching due to the high number of vessels calling out of window.
Subramaniam explained that many shipping companies have had to change routes due to the Red Sea crisis, having to use the Cape of Good Hope instead of the Suez Canal.
The change of route has resulted in longer voyages, necessitating shipping lines to omit some ports to catch up on their schedule. Hence, some lines calling at Port Klang are discharging more containers, which will be feedered to regional ports.
Due to this, there has been an increase in volume of containers and yard density in both terminals, especially in Westports, he said.
Tieman, meanwhile, explained that Asia’s trade volume with Europe is declining not because of the Red Sea conflict but more because of energy issues in Europe. This makes it less attractive to produce in Europe and a less favourable economic outlook, resulting in lower demand there.
Maybank Investment Bank Bhd analyst Loh Yan Jin pointed that Westports Holdings Bhd had said the “congestion” is quite manageable so far but traffic is volatile week by week.
“Some weeks there were zero congestion, while some weeks yard utilisation can go up to close to 100 per cent. Looking at their 1Q results, it doesn’t seem like this has affected the port’s throughput drastically,” he added.
Economist Dr Shankaran Nambiar said the Red Sea crisis could lead to a connectivity crunch. But at the same time, it offers an opportunity for Malaysian ports to show their mettle.
“Global supply chains are going to be affected and trade will be impacted. The cost of transportation will increase and transportation times increased. For critical goods, the manufacturers may decide to fly them, as was done by the MNCs during Covid-19.
“But that will raise the cost of the goods and reduce margins for firms. MNCs will be better able to absorb these costs. If Port Klang is not able to deal with the congestion, some of the vessels may bypass the port and head to Singapore.
“Technically, there are other alternatives, but in practice they will not be favoured. A more feasible option would be for Malaysian ports to rise up to the opportunity and relax trade facilitation measures. However, this would only be a partial solution,” he added.
Northport (Malaysia) Bhd chief executive officer Datuk Azman Shah Mohd Yusof said the company had seen more ad hoc vessel calls in the first four months because of the major congestion issues in Singapore and other rival ports.
“There are vessels being diverted to Port Klang where there is less congestion,” he said, when contacted.
Azman added that Northport’s volume had grown seven per cent year-on-year in the first four months of 2024.
“We have actually recorded 1.05 million twenty-foot equivalent units for the first four months of the year. We are also seeing an increase in terms of the number of additional or ad-hoc calls coming into Northport.”
He noted that because of Red Sea crisis, there is a sudden surge of vessels being re-routed.
“It is actually increasing the waiting time at anchorage but in the case of Northport, it is hardly two hours.
“We are able to provide berth on arrival around 85 per cent of the time. The only issue with regards to this higher volume or higher vessel calls would be that we would probably have some congestion issues in the yard in terms of our import containers.
“I think we are now averaging between 3,000 and 4,000 movements per day for import containers. It is actually leading to an increase to our yard occupancy, which is now averaging between 70 per cent to 85 per cent. But it is still manageable.”
Azman added that Northport is working very closely with the hauliers and freight forwarding agents.
“We can actually clear more import containers to free up more yard space. At the moment the situation is under control at Northport,” he remarked.
Top Glove Corp Bhd, meanwhile, acknowledged that the company and all major glove manufacturers in Southeast Asia and China are affected by the Red Sea crisis.
“For Top Glove, there is minimal impact on our raw material supply. Our natural rubber latex is sourced from Thailand and transported via land, while our nitrile latex supply is sourced from local suppliers and similarly, transported via land which mitigates delays arising from reliance on imported raw materials.
“Moreover, Top Glove has operations in Thailand which are able to produce both natural rubber latex and nitrile gloves, ensuring we will still be able to supply gloves to our customers. Top Glove also requests customers to pre-plan orders well in advance to minimise impact of shipment delays,” it said.
Economy Rice podcast macroeconomic analyst Aaron Pek said 25-30 per cent of global container shipping volume passing through the Suez Canal and the Red Sea crisis has forced many ships to be redirected around South Africa instead.
“This has a direct impact on ocean freight rates,” he added.
While the incremental shipping costs involved are marginal (higher fuel costs offset by lower transit fees), passing through the Suez Canal can require up to [an additional week, contributing significantly to higher unit shipping costs. “This impact could be further exacerbated if there is already an existing supply glut in container shipping markets,” he said.
