The port sector is expected to embark on a recovery mode, following the fading of the consolidation impact in global shipping alliances
By SHAHEERA AZNAM SHAH / Pic By MUHD AMIN NAHARUL
The port sector is anticipated to perform better this year, with cargo and container volumes in major ports expected to recover from the losses they suffered in 2017, which resulted from the consolidation of global shipping alliances.
MIDF Amanah Investment Bank Bhd analyst Adam Mohamed Rahim said the container volumes for the nine months of 2018 (9M18) at Westports Holdings Bhd and MMC Corp Bhd’s subsidiary, Pelabuhan Tanjung Pelepas Sdn Bhd (PTP), increased by 2.1% and 5.6% year-on-year (YoY) respectively, compared to a year ago.
“We are anticipating a recovery in container volume for major ports in the country. For the 9M18, the container volumes at the major ports such as Westports and PTP increased by 2.1% and 5.6% YoY.
“The higher container volumes at these ports were observed as the effects of the reshuffling in shipping alliances fade,” he told The Malaysian Reserve (TMR).
Adam said the port sector is also expected to embark on a recovery mode, following the fading of the consolidation impact in global shipping alliances.
“On average, it takes about 15 months for the recalibration to settle down and it was seen in the middle of 2018, which coincided with the growth in container throughput for Port Klang,” he said.
Adam said the sign of un- even import and export activities, which had stemmed from exporters’ urgency to send their cargo to the US before the trade war tariffs kicked in, may soon wear off due to the recent positive outcome in the US-China trade negotiation.
“We suspect that there were front-loading activities of cargoes ahead of the increased tariffs on import goods from China to the US, which was supposed to begin in January 2019.
“However, in early December 2018, the effective date was postponed for a period of 90 days due to the ongoing trade negotiation between the US and China.
“We expect the front-loading activities to take a breather during these 90 days,” Adam said.
In addition, he said any negative impact and further unfavourable results rising from the trade tension will be balanced by the utilisation of shipping vessels between Asian countries.
“We opine that the impact of the trade war will be minimal towards Malaysian ports as the majority of vessels used in the transpacific routes fall into the 7,200 twenty-foot equivalent units (TEUs) size, compared to the average 2,200 TEUs vessel size used in the intra-Asia shipping routes.
“The larger size vessels will feel more pressure and more likely to be underutilised in the onset of a trade war compared to the smaller vessels.
“The utilisation of smaller-sized vessels will be sustainable due to the economic growth within the Asian countries,” he said.
In the longer run, Adam said the growth in total cargo volumes will be steered by the resilient economic growth in Asia and Asean, which are expected to rise at 6.3% and 5.2% YoY respectively for 2019.
He said MIDF has projected an incline trend in 2019 for Port Klang, as Westports’ total cargo volume is expected to increase by 4.9% YoY, while Northport by 2.3% YoY.
“The PTP’s total cargo volume is expected to increase by 5% YoY. Our top pick among the port operators is MMC Corp, which is premised on the full acquisition of Penang Port Sdn Bhd as it is expected to increase the group’s revenue for its port segment, coupled with the commendable orderbook of above RM10 billion,” Adam said.