Malaysia’s shipping industry has been struggling for the past six months due to the prolonged impact of COVID-19 pandemic and as firms slowly getting back on their feet in the second half of 2020, the question on longstanding issues in the industry remains.
Undoubtedly, the local industry is highly exposed to the dynamic of the global market as it involves in import and export activities, however, with a solid plan to support the industry to survive the impact of COVID-19 and rapidly changing market can be minimised.
Thought Partners Group Consulting (TPG) founder and group managing partner Abi Sofian Abdul Hamid explained the relevant authorities must re-look at the country’s maritime industry and come up with a medium-term plan in order to revive the industry.
“The need and resources must be re-aligned with the dynamics of the industry itself. There were talks about a Masterplan for the Maritime Industry a few years ago. However, its status, especially in terms of understanding by the stakeholders, has not been publicised,” he added.
Commenting further on the impact of the pandemic on shipping businesses, Abi Sofian said it may take up to six months to clear the backlogs and pave the way for the business to approach normality.
MIDF Amanah Investment Bank Bhd reported that Malaysia’s exports decreased 25.5 per cent year-on-year (yoy) in May 2020 to an 11-year low, the hardest fall since May 2009, while imports contracted by 30.4 per cent yoy, the largest dip since January 2009.
“Overall, I would expect the growth will be reduced significantly to half of the projected growth prior to COVID-19. This is parallel with reports that indicate the industry has been affected badly by the pandemic. Throughput at many major ports including in China has shown a drop in cargo handled during the first two months of the lockdown.
“The activities were mostly affected due to health requirements. For instance, although ports have been operating 24/7 during the lockdown, many activities have been reduced due to the ports nature being part of the supply chain. The ports may be open, however, movements of cargo are rather limited due to closure of factories, warehouses and even the transporters,” he added.
On the recent development of the global shipping industry, Abi Sofian explained that Korea is rebuilding its maritime industry with the HMM (previously Hyundai Merchant Marine) Algericas, dubbed as world’s largest container ship took its maiden voyage last month.
“This is after the demise of Hanjin Shipping in 2016 and by building Ultra Large Container Vessel (ULCV) like HMM Algericas, it will contribute to higher employment and improve exports for Korea. In this instance, it is believed that another eleven ULCV with 24,000 Twenty-Foot Equivalent Unit (TEUs) capacity will be rolled out by the end of 2020.
“This kind of demand arises as the industry is finding ways to strengthen the players and stabilise the market with the formation of Alliances including THE Alliance, 2M, Ocean Alliance, among others. This will be expected to result in fewer sailings hence more stable costs in the long run,” he explained.
Comparing the situations in Malaysia and Korea, Abi Sofian further explained that although Port Klang and Port of Tanjung Pelepas (PTP) are among the top ports in ASEAN and Asia, their impact on maritime industry as a whole cannot be compared with the impact of Algeciras on maritime industry in Korea.
“These two ports are mainly involved in transhipment and port operations-related activities, and at the most, they could increase feeder services with smaller ports. As for shipbuilding, the activities are confined to smaller size ships and these firms have been struggling in obtaining financial support,” he explained.
Malaysia Shipping Master Plan seems lagging, encompasses of RM3 billion in soft loans has been long overdue and need to be looked into with urgency to help the local players survive and for the shipping industry to flourish in tandem with other industries in Malaysia.
“The exit of MISC Bhd from container business circa 2011 has clearly resulted in the slower growth of the maritime industry. We have to rely on foreign vessels to carry our export and import, especially for the long haul. The spin-off from the exit includes the lack of places for our seamen to train, reduced bunkering and related activities, among others,” he said.
As for local ports capabilities in welcoming ULCV, Abi Sofian opined that both major ports in Malaysia are capable to handle such vessels and have had ULCVs calling them over the last years or so.
“Obviously the ports will take the necessary steps to prepare itself to handle such vessels if and when the need arises,” he added.
International shipping companies like Orient Overseas Container Lines (OOCL), COSCO and the Mediterranean Shipping Company (MSC) were among companies that made calls at Westports in Port Klang and PTP.