Malaysia: Container throughput to drop by 15% on supply chain disruption

The container throughput for 2020 is expected to reduce by 15% from 25 million twenty-foot equivalent units recorded in 2019 due to lower transhipment activities and container volume, caused by the disruption in supply chain, according to Shipping Association Malaysia (SAM).

“The scenario after the pandemic has changed as people buy things online. The role of technology will be the driving force of logistics including big data and Internet of Things,” said SAM vice chairman Low Pooi Choon at a press conference in Shah Alam yesterday.

SAM added that stiff competition, prolonged overcapacity and dwindling demand of maritime freight have pressured the shipping liners to revise the pricing scheme as the industry is unable to absorb additional losses.

SAM chairman Ooi Lean Hin said the pricing scheme, which has been criticised by certain quarters, is a measure for the shipping liners to mitigate their losses.

“The landslide charges, which is one of the charges under the scheme, is the evolution of the pricing model for shipping liners, and it is a desperate attempt for the liners to mitigate their losses. They have been losing money for so many years.

“The scheme is already an established practice by global shipping players. Importers and exporters would have costed these charge items into their free on board; and cost, insurance and freight pricing.

“We are unfortunately operating in a highly sensitive freight market,” he said.

Ooi was responding to claims by the Malaysian National Shippers’ Council which argued that liners are profiteering by imposing exorbitant charges on the merchants.

“The fact remains that carriers are still reporting huge losses since 2016, as reported in the Annual Review of Maritime Transport published by the United Nations Conference on Trade and Development.

“Thus, it is not possible how liners are profiteering when they continue to report such losses, particularly during the Covid-19 crisis,” he said.

Globally, a survey by Blue Alpha Capital founder John McCown has estimated a loss of US$10.6 billion (RM45.2 billion) for the container segment of the shipping industry.

Ooi added that in hindsight, the global export and imports business community has benefitted from the huge capital investment for developing larger vessels, which has increased the efficiency, as well as lower the cost of logistics.

“The global business community has benefited from the investments in new and bigger ships by shipping lines in respect of the efficiency and lower costs of global ocean logistics distribution, even to the extent of enjoying ocean freight rates below the carriers’ costs.

“Due to the extremely competitive nature of the container ocean transportation business, liners are pressured to provide these benefits,” he said.

Commenting on the container security deposit, which also has been criticised by Federation of Malaysian Freight Forwarders, is not against the practices and regulations recommended by the port authorities.

“The proposal from the Transport Ministry and Port Klang Authority on alternative security instruments to security deposits vis-à-vis Non-Cheque Deposit, Container Ledger Account and iCARGO+ is merely a recommendation in resolving the issue of security deposit collection and not a gazetted law.

“The accusation that shipping lines have been disrespectful of the law on this issue is then totally incorrect because the alternative security instruments are merely proposed recommendations,” Ooi said alternative mechanisms are optional for shipping lines and are subjected to merchants’ subscriptions to these schemes.

The container security deposit is a risk mitigation mechanism imposed by the shipping liners to cover the post-delivery charges that include the cost of damaged containers. The deposit charges could be ranged between RM300 and RM1,000 per 20-ft container.
Source: The Malaysian Reserve

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