Port sector likely to face challenges

The Star

22-04-2025

Maybank IB said container volumes may retreat once the tariff grace period lapses, as the frontloading wave passes.
PETALING JAYA: The United States' steep tariffs on Chinese goods have led to a sharp 30% to 60% drop in China–US container bookings since tariffs took effect, while bookings from other parts of Asia have also declined by 10% to 20%, reflecting broader demand weakness.
This has led the World Trade Organisation (WTO) to downgrade its 2025 global trade growth forecast to 0.2% from its previous estimate of 2.7%, citing escalating US-China trade tensions.
The WTO warned that merchandise trade between the United States and China could decline by as much as 80%, potentially triggering a significant reshaping of global trade flows.
In a worst-case scenario, where the most severe tariffs are reinstated after the current 90-day pause, global trade could contract by as much as 1.5%.
As it is, there has been a sharp rise in blank sailings (cancelled or skipped sailings by shipping lines, often used to manage overcapacity or respond to weak demand) since the US tariffs on China took effect, particularly for the China–US routes.
In contrast, South-East Asia's ocean freight rates have remained relatively resilient, supported by temporary demand stemming from the 90-day tariff reprieve announced April 8.
'Some exporters have reportedly ramped up production to frontload shipments to the United States ahead of the tariff implementation.
'However, in our view, this surge has not been sufficient to offset the steep decline in Chinese containerised exports, evidenced by last week's 3% week-on-week decline in the World Container Index.
'That said, it could still provide temporary support to local port throughput, particularly from intra-Asia trade volumes and gateway volumes,' Maybank Investment Bank Research (Maybank IB) said.
It added that container volumes may retreat once the tariff grace period lapses, as the frontloading wave passes.
The research house believed that without clearer policy signals or further trade relief, order volumes could decline sharply.
'While near-term may offer a fleeting volume uplift, persistent uncertainty and elevated costs are shaping a more challenging outlook for the sector.'
The research house believed that container freight rates could remain on an upward trend in the second quarter, albeit softer year-on-year, driven by ex-China frontloading activities that have brought forward the traditional peak shipping season, which typically starts in May.
However, it is expected that downside risks will persist into the second half of 2025, including demand softening due to frontloading exhaustion and a potential slowdown in US-China trade flows, both of which could weigh on container freight rates.
The research house said a key wildcard remains the Red Sea disruption, whereby reopening of the Suez Canal could free up more vessel capacity, adding pressure on freight rates.
Maybank IB has downgraded the sector to 'neutral' from 'positive', as the deteriorating global trade outlook would likely weigh on the performances of the companies under our coverage, though partially cushioned by domestic consumption demand. It has 'hold' ratings on Westports Holdings Bhd and Swift Haulage Bhd .
'Malaysian-listed logistics players like Swift Haulage, Tasco Bhd and FM Global Logistics Holdings Bhd have minimal exposure to the US market.
'While our channel checks suggest that companies have received increased enquiries from foreign exporters due to trade diversion, upside on volume is limited by challenges including erratic order flows, poor shipment visibility and infrastructure strain,' the research house said.
It added port delays have been building up at key local ports like Westports and Port of Tanjung Pelepas (PTP), further strained by alliance reshuffling in February for PTP.