Friday, January 21, 2011

Rising trade strains Malaysia's top ports

Malaysia's growing international trade is putting a strain on main ports, with delays in cargo handling being reported despite an increase in throughput volume, according to a business report on Malaysia.

Publisher and consultancy Oxford Business Group (OBG) said as majority of Malaysia's foreign trade as well as its domestic cargo transfer is moved by sea, delays in clearing the ports can have a direct impact on the economy.

"Bottlenecks add to the costs of both shipping firms and their clients, especially those with perishable freight or cargoes being transported on a tight deadline.

"Though there has been an increase in the number of 20-footer container units being handled by Malaysia's ports this year, some of the main cargo facilities are being stretched, with complaints coming from representatives of the shipping industry and producers," it said in its latest Economic Updates on Malaysia.

International Trade and Industry Ministry's (Miti) figures released in early December show a continuing surge in overseas trade, with the 10-month import and export data rose over 20 per cent from the same period in 2009 to RM967.58 billion. Exports climbed by 18 per cent to RM529.56 billion, while imports increased by 24.7 per cent to RM438.02 billion.

The government has revised upwards its projected economic growth for 2010 to 7 per cent from 6 per cent, due partly to a solid increase in foreign trade.

In the south, Johor Port Shipping and Forwarding Association said delays at the Johor Port were slowing the flow of imported raw materials, disrupting production, and resulting in missed deadlines for shipments. These are potentially harming Malaysia's reputation as a supplier. 

The port has little room for further expansion, having been designed to handle a maximum of 800,000 20-foot equivalent units (TEUs) a year, a limit it has now reached.

In mid-November, a number of shipping companies operating through Johor Port said they would be imposing a surcharge on exporters due to high levels of congestion and delays at the facility. 

The surcharge is to offset losses stemming from the delays, including the costs of operating vessels, charter fees and charges resulting from missed connections. 

This is expected to hit industries in Pasir Gudang, with manufacturers having to fork out US$25 (RM77) or more per container in extra levies.

OBG said port operators in Johor are trying to improve the situation, but there have been no quick-fix solutions to that. 

MMC Corp Bhd, which operates both Johor Port and Port of Tanjung Pelepas (PTP), recently floated a proposal to shift all container-handling activities to PTP, leaving Johor Port to deal with other cargoes.

However, the move to consolidate port activities was rejected by the government, with Miti Minister Datuk Seri Mustapa Mohamed saying the decision had been taken after considering views and concerns from companies and industries operating in Pasir Gudang.

Geodis Wilson Freight Management general manager Donovan Niap believes the government should reconsider its decision, given the continuing congestion at Johor Port.

Johor Port's operators have announced plans to improve cargo-handling capacity, including acquiring more cranes and replacing ageing equipment. 

"However, the space constraints will mean there is only so much improvement that can be wrung out of the upgrades," said OBG.

Up north, the operators of Penang Port are taking a different tack, hoping a US$100 million (RM307) dredging project to deepen the main channel leading to the port's container facility will enable it to attract more trade and handle larger vessels.

The project has the potential to turn the North Butterworth Container Terminal into a major facility, capable of handling up to two million TEUs a year.

The expansion of the port is timed to coincide with work to electrify and lay duel track on the Ipoh-Padang Besar railway, which should be completed by 2013.

OBG reckons that despite the private sector and state authorities' additional investments to improve port facilities and infrastructure to clear the bottlenecks, these projects will take time.

"This means freighting delays will continue to pose problems for Malaysia's economy," it added.

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