Retaining cargo volume

New Straits Times

2 hours ago

KUALA LUMPUR: Malaysian ports operators and authorities should introduce targeted incentives and improve turnaround times to offset tariff disadvantages and cargo diversion to rivals, industry observers said.
With US tariffs on Malaysian goods now set at 19 per cent compared to just 10 per cent for Singapore particularly, shipping lines are becoming increasingly cost-sensitive.
High-value cargo and US-bound shipments could be rerouted if Malaysia fails to respond decisively, they added.
Transport analyst and economist Dr Rosli Azad Khan said said Malaysia's ports particularly Port Klang and Port of Tanjung Pelepas (PTP) could maintain their attractiveness with targeted incentives.
"Temporary port fee reductions, streamlined customs clearance or rebates for shippers handling transshipment cargo could keep carriers from diverting too much volume," Rosli told Business Times.
Westports Holdings Bhd acknowledged the increasingly complex operating environment, pointing to multiple global headwinds such as tariff volatility, growing regionalisation, military conflicts, intermittent port congestion, and unsettled interest rates.
Despite these challenges, the company noted that front-loading activity earlier this year had supported container volume growth to date.
However, it cautioned that sustaining this momentum in the second half may prove difficult due to persistent external pressures.
"Asia's economic dynamism and the alliance-based operating models of container shipping lines could help cushion some of the volume decline," the company said in its latest financial filing.
It forecasted a single-digit positive growth in container volumes for the year but noted that projections would be revisited as conditions evolve.
Bintulu Port Holdings Bhd also highlighted concerns over the uncertain global trade environment, stating that ongoing tariff uncertainties and policy shifts could impact its overall performance.
Nevertheless, Bintulu Port said it remains focused on enhancing operational efficiency, ensuring equipment reliability and maintaining cost competitiveness.
"The handling of LNG cargo and vessel calls will continue to be the main revenue contributor. Additional support is expected from methanol, raw energy, Samalaju cargoes, and bulking services," the port noted.
Efforts by Business Timesto obtain comments from other port operators, shipping companies and industry associations were unsuccessful at press time.
Cost Pressure
Rosli said there is a real risk of cargo diversion, especially for US-bound shipments and high-value goods, because shipping lines will respond to cost differentials.
Rosli explained that the 19 per cent tariff effectively raises the landed cost of Malaysian exports to the US, making them less attractive compared to goods routed through lower-tariff hubs like Singapore.
While tariffs are technically imposed based on the origin of goods, shipping lines and freight forwarders will naturally adjust their routing preferences if Malaysian ports appear less efficient or more costly under the new tariff burden.
He said a likely scenario is that transshipment competitiveness will decline, with US importers possibly preferring to consolidate cargo via Singapore, which enjoys the perception of regulatory stability, efficiency and now a tariff advantage.
"This could erode Malaysia's position as a regional hub, particularly for Port Klang and PTP, which rely heavily on transshipment volumes, often exceeding 50 to 60 per cent of their container throughput," he noted.
However, Rosli said the net impact of the tariff gap would not be immediate or total and over time, although the combination of a 19 per cent tariff on Malaysian-origin goods and Singapore's logistical strength could gradually shift cargo flows southward.
He added that not all transshipment cargo would be affected by the tariff difference, especially when Malaysia continues to offer lower overall port charges.
"Malaysia's port fees, denominated in ringgit, remain cheaper than Singapore's, providing some exchange-rate advantage," he said.
Rosli warned that the bigger concern lies in perception, as major carriers may gradually adjust schedules and alliances to favour Singapore if they begin to see Malaysia as less competitive.
Tariff Parity
On what Malaysia can do to stop losing transshipment volume to rival ports, Rosli said the possible countermeasures include negotiating or lobbying for tariff parity.
He said Malaysia must engage Washington through diplomatic and trade channels to argue for a level playing field, possibly by tying tariff treatment to Asean-wide arrangements or demonstrating compliance with US trade requirements.
Sunway University economics professor Dr Yeah Kim Leng said Malaysia's ports are being affected by changes in trade volume and export market shares caused by the differential import tariffs imposed by the US on its trading partners.
He added that a potential decline in trade, driven by higher US prices and stricter controls to prevent tariff circumvention, may impact port throughput and transshipment volume.
"With lower activity, Malaysian ports may be forced to cut rates for importers and exporters. Singapore's tariff advantage in exporting to the US may divert some trade flows to Singapore.
"This needs close monitoring so that port operators can adopt countermeasures to minimise any potential leakage, with appropriate government support," he said.
Yeah called for Malaysian ports to improve efficiency, turnaround times and value-added services to reduce the diversion of transshipment volume to Singapore.
He said they also need to enhance connectivity with major international and regional ports to compete with Singapore's advantage in global linkages.
Early Days
UniKL Business School economic analyst Associate Professor Dr Aimi Zulhazmi Abdul Rashid said the dynamics of the Trump tariffs are clearly reflected in the ongoing shifts in US administrative decisions, creating unpredictability and uncertainty in global trade.
He said Malaysia, like other countries, must learn and adapt accordingly to the new US trade policy under the Trump administration.
Nevertheless, Aimi believes there will not be a significant impact yet, as the Trump administration is still negotiating with many countries.
"Even the decision on Singapore has not been finalised, as the 10 per cent currently imposed is a temporary rate, similar to Malaysia's, effective until Aug 6.
"More importantly, the China-US trade ceasefire will end on Aug 12 and will set the tone for the direction of global trade between the two largest economies," he said.
Similarly, economist Dr Geoffrey Williams said it is still too early to judge trade shifts, as the tariffs may encourage changes in business models, but he cautioned that there is a risk and Malaysian ports need to respond.
He added that shipping out of Singapore will be cheaper unless the tariffs are applied based on the country of origin.
He said this depends on whether the tariff is charged based on where the product was made, rather than where it was shipped.
"Malaysia always faces tough competition from Singapore, especially at PTP in Johor but is so far very competitive in cost and efficiency terms.
"Improving the quality of shipping services, quick turnaround and easy regulations will enhance competitiveness in Malaysia," Williams added.