Demand outstrips ships as global economy reopens
by NUR HANANI AZMAN / Pic by MUHD AMIN NAHARUL
SHIPPERS have been caught out by the impact of Covid-19 on the global supply chain and are now facing a shortage of ships and containers that has forced sea freight rates to skyrocket compared to pre-pandemic times.
A survey by the Malaysian National Shippers’ Council (MNSC) from Oct 7-10 showed sea freight is now at an all-time high, having increased between 100% and 700% of pre-pandemic levels.
MNSC chairman Datuk Andy Seo said this has led to high transportation costs, causing companies to make transport-driven adjustments in their supply chain strategies.
He said the global supply chain crunch has also forced shippers to absorb higher logistics costs such as warehousing, forwarding, haulage and landside charges that have increased in tandem with freight costs.
As a result, Malaysian exports are becoming more expensive to consumers and less competitive globally.
“This notable impact on the entire supply chain and the burden of high cost have been passed on to the consumers, while negatively affecting export competitiveness.
“As there is no certainty when this situation is expected to normalise, shippers are trying to cope with the situation by engaging multiple forwarding agents and shipping carriers for quota utilisation and rationalising the limited container, vessel space and cargo with their customers and working with them to reschedule to the earliest possible delivery date to suit the demand,” he told The Malaysian Reserve.
More importantly, shippers are looking at alternative modes of freighting via air, land or rail mode to secure incoming and outgoing materials.
MNSC has conducted engagement sessions with key industry players — AirAsia Bhd, Teleport and Freight Chain — so shippers can learn viable alternatives to sea freight for faster, cheaper and reliable freight services.
He said shippers, as the main contributor to international trade, must continue to be supported as the catalyst of growth.
“MNSC has been working closely with the Ministry of Transport (MoT) and other relevant stakeholders from the logistics industry to ensure that efficient shipping, air and rail services are provided at a fair rate.
“We are calling for intervention by MoT and port authorities, similar to efforts undertaken by the US Federal Maritime Commission and South Korean Authority to request shipping lines to increase capacity and allocate equipment to more critical trade lanes,” he added.
Seo also suggests that the government provides more grants to cover logistics costs — currently the temporary relief granted through the Market Development Fund (MDF) under the Malaysia External Trade Development Corp only covers export shipment with a cap of 30% of total logistics costs for export, subject to a maximum amount of RM40,000 per shipment.
“Since the relief is only offered until the end of 2021, respondents request for an extension of time to claim under MDF and to expand the grant to include import shipments.
“We also request for tax incentives such as tax rebate and double deduction from corporate tax be permitted to assist companies to cope during this difficult period,” he said.
Seo believes in digitalisation of the processes and synchronisation of the standard operating procedures of the Royal Malaysian Customs Department and the other government agencies for a resilient supply chain.
“Reduce dependence on foreign shipping lines by developing Malaysian-owned containerised shipping lines.
“Develop the Malaysian shipping container industry, which is highly reliant on imported containers to meet the growing demand,” he concluded.