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Malaysian Ports commence future-proof strategies

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PENANG : Consumer demand shock, an increase in e-commerce trade, a shift in trade direction, crude oil price fluctuation, freight rates, and port congestion are some of the issues that ports confront worldwide.

Universiti Malaysia Terengganu adjunct professor and distinguished fellow at the Maritime Institute of Malaysia, Nazery Khalid, said the maritime industry is a trade facilitator and is heavily influenced by micro and macro-economic developments.

“With subdued global trade in 2023, Malaysia’s gross exports are expected to expand modestly, at 1.5 per cent in 2023. This points towards slower throughput volumes handled by Malaysian ports in 2023 compared to the container throughput collectively handled in 2022,” he told.

However, according to data from port operators and the Malaysia Marine Department, Malaysian ports handled 20.72 billion twenty-foot equivalent units (TEUs) of exports, imports, and transshipments during the first nine months of this year, up from 428.46 million TEUs during the same period in 2022.

Nazery reiterated that after the port sector’s stellar performance following the reopening of economies post-pandemic due to pent-up demand, there are ample signs of a slowdown in the sector in tandem with a drop in seaborne trade volumes.

He said that international shipping company Maersk Line has announced cutting 10,000 jobs from its global workforce of 110,000 on the back of a sharp fall in demand for container shipping services, overcapacity in container shipping, rising operating costs, and weaker freight rates.

“This move, coming from a shipping company that controls an estimated 20 per cent of the global container trade, is a sure sign of a downturn in the shipping and maritime industry,” he added.

Growth of the port industry: Carey Island, MMSW, and local ports

The proposal to expand Port Klang, which currently serves as the principal maritime entrance point into Malaysia, through the construction of the RM28 billion Carey Island mega port, has sparked considerable interest despite the port sector’s pessimistic growth forecast for this year.

Stakeholders in the industry are hopeful that the plan, which commenced in the feasibility study phase after being proposed in 2017, will be executed soon.

Nazery said there are grounds to be optimistic about the long-term outlook for the local maritime industry, with the prospect of the construction of a new port on Carey Island, Port Klang, auguring well for Malaysia’s ambition to strengthen its position as a maritime hub in Southeast Asia and to leverage its strategic location along the busy seaborne trade route of the Straits of Malacca and also the South China Sea.

The port is intended to have a handling capacity of 36 million TEUs, triple the 13.2 million TEUs handled by Port Klang in 2022, with the development works projected to start in 2025 and continue in phases until 2055.

“Although this plan will take several years to implement, once completed the port will generate a lot of excitement and business activity among shipping lines, logistics players, and various support service providers.

“It would also serve to improve Port Klang’s efficiency, productivity, and competitiveness, as well as increase its appeal to larger vessels transporting large volumes of cargo. Furthermore, considering Port Klang’s prominence as the national load centre and marine hub, the new port would increase Malaysian trade volumes,” he said.

Thought Partners Group Consulting (TPG) founder and group managing partner Abi Sofian Abdul Hamid, who is also a former Northport chief executive officer, said that as the port industry is evolving at an unprecedented rate and with Malaysia focusing on major infrastructure such as Carey Island Port, public and private stakeholders must pay more attention to training the future workforce to be involved in the ever-changing industry with new skills and approaches.

“There is also a need for a Research Centre on Logistics and Supply Chain to manage the various data collected by the relevant agencies. This collected data will be useful in future planning. At present, we don’t have a place where industry players and stakeholders can go to get the relevant data.

“For instance, we are unable to adequately work out the Logistics Performance Index, which is crucial to showing the efficiency of our logistics sector,” he added.

Moving on to the most recent development for local ports, the Ministry of Transport announced upgrading the Malaysia Maritime Single Window (MMSW) system, which aims to integrate and coordinate port trade in Malaysia.

The MMSW is expected to be implemented by Jan 1, 2024, and the port authorities will bear the cost of developing the RM20 million system.

The system, which is expected to promote efficiency and resolve issues of data duplication among ports, process international trade activities, reduce waiting time for cargo clearance, and lower business costs, is a mandatory requirement of the Convention on Facilitation of International Maritime Traffic 1965 (FAL Convention 1965) by the International Maritime Organisation (IMO).

Narrowed down to individual ports, local ports throughout Malaysia are expanding to accommodate larger vessels and take more cargo while at the same time forming alliances with global and regional counterparts and becoming increasingly integrated into the global supply chain.

Ports under MMC Bhd have been actively investing in equipment and infrastructure; for instance, Penang Port Sdn Bhd is aggressively planning for future development, which includes development in four phases, which can cost up to RM1.5 billion, whereas Northport (Malaysia) Bhd has earmarked capital investment to purchase 34 new pieces of terminal equipment this year to boost the port’s capacity and competitiveness.

Penang Port Chief Executive officer Sasedharan Vasudevan told that the port’s maximum capacity would be reached in the next five years, with the current cargo handling capacity standing at 70 per cent.

“Our cargo port handling reached 70 per cent even before Covid-19, declined during the pandemic’s peak, and is now returning to pre-pandemic levels before Covid-19.

“We have already started preparing for the port’s future expansion or development, especially for the container business, which is our fastest expanding. We have performed a master plan study, engaged a consultant, and intended to expand into the sea on approximately 200 hectares,” he added.

Sasedharan said the reclamation of 202.34 hectares of land would be for the next 30 years and would be divided into four phases.

“We have submitted a proposal (to expand the port) to the government, the Penang Port Committee, which is the port authority, as well as the Ministry of Transport,” he said.

Johor Port Bhd, another member of MMC Group, entered into an agreement with PT Pelindo Jasa Maritim in July this year to explore possible collaborations and opportunities to enhance the maritime sector and foster stronger bilateral relations between both organisations.

PT Pelindo Jasa Maritim is a subsidiary of PT Pelabuhan Indonesia (Persero) that provides marine services, port equipment maintenance, and port utility services.

Johor Port also reported that it overtook Singapore in terms of the number of liquefied natural gas (LNG) bunkering operations and total bunkered tonnage, further solidifying Malaysia’s position as the LNG bunkering hub pioneer in Asia.

Meanwhile, Westports Holdings Bhd has received cabinet approval for its proposed expansion of its container terminals (CT) 10 to 17, registering a net profit of RM195 million for the third quarter ended Sept 30, 2023, an increase from RM150.39 million in the same period last year.

Revenue for the port operator rose to RM542.31 million from RM520.54 million previously, mainly attributed to a rise in container revenue, which contributed to the higher net profit, coupled with a reduction in sales and administrative expenses.

For the nine months ended Sept 30, 2023, Westport’s net profit rose to RM575.35 million against RM464.54 million in the same period last year on the back of revenue improving to RM1.60 billion from RM1.55 billion previously.

Perak came into the limelight after the Budget 2024 announcement, following the proposed development of four industrial parks.

Perak is also seeing significant development in terms of its ports where the Perak State Development Corporation inked a cooperation agreement with the Port of Antwerp-Bruges International (PoABI) in 2022 to develop the Lumut Maritime Industrial City (LuMIC) in Manjung, Perak, involving a total investment of approximately RM72 billion over the next 25 years.

Deputy Prime Minister Datuk Seri Fadillah Yusof visited the PoABI in June this year and was briefed on the port by its director, Stefan Cassimon.

Environmental, social, and corporate governance (ESG) adoption

Amid the move towards sustainability, some players in Malaysia’s maritime sector have undertaken earnest efforts to reduce their carbon footprint to comply with international regulations and to meet the national zero-carbon targets and those set by the IMO as more shipowners shift towards lower-sulphur fuel and install scrubbers onboard their ships to reduce greenhouse gas emissions (GHG).

Port operators are also going green by replacing diesel-powered equipment, such as cranes, with electricity and using energy-saving LED bulbs.

In addition, more maritime industry players are adapting Industry 4.0 solutions and technologies to enhance their efficiency and productivity and to become more cost-competitive, and these efforts are set to continue in 2024 and beyond.

Simultaneously, the Port of Tanjung Pelepas (PTP), a joint venture between APM Terminals (30 per cent) and the MMC Group (70 per cent), has been selected to join the Partnerships for Infrastructure (P4I) initiative, a government-to-government decarbonisation scheme between Malaysia and Australia.

The P4I project aims to spearhead Malaysia’s decarbonising effort in the maritime industry and foster inclusive growth through sustainable infrastructure in Southeast Asia.

2024 Outlook
MIDF Research’s thematic study previously said that it had upgraded its call on the transportation sector, particularly port and logistics operators, to a “positive” sector from a “neutral” sector on the back of promising trade prospects.

The research house said its optimism was driven by the ratification of the Regional Comprehensive Economic Partnership (RCEP) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) agreements.

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