Friday 29 Mar 2024
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KUALA LUMPUR (July 19): The container and cargo-handling prospects of Malaysian ports are likely to remain healthy in 2017 in tandem with the gradual global economic recovery, said RAM Rating Services Bhd.

The rating agency expects throughput growth to remain in the low single-digit levels, akin to the modest 3% recorded in 2016

“Prospects for the key national ports including Westports Holdings Bhd, Northport (Malaysia) Bhd and Pelabuhan Tanjung Pelepas Sdn Bhd remain stable, benefiting from the strengthening local and regional economic outlook," AM co-head of infrastructure and utilities ratings Davinder Kaur Gill said in a statement today.

“Nonetheless, in the immediate term they are still vulnerable to the effects of the current trend towards protectionism and changes in shipping alliances,” she added.

RAM noted that while the global economy is gaining momentum — with world trade expected to expand 3.8% in 2017 against 2.2% in 2016 — the question remains on the impact recent developments such as Brexit and US President Donald Trump’s protectionism rhetoric have on global trade flows.

However, Davinder said Malaysia continues to benefit from its strategic position along the Straits of Malacca, one of the busiest shipping lanes in the world.

“Malaysia’s throughput remained resilient in 2016, with container throughput recording a 10-year CAGR [compound annual growth rate] of 6% while that of cargo throughput came in at 5%.

“At the same time, Malaysia handled more than 25% of the containers passing through the Asean-5 nations, in other words Malaysia, Singapore, Thailand, Indonesia and the Philippines and accounted for 3% of world container traffic,” she said.

While prospects for regional trade expansion are still encouraging, Davinder said that the long-term growth of Southeast Asian ports must be analysed in the context of economic growth, the region’s upcoming new port capacity and the requirements of the newly formed shipping alliances.

“On that note, regional port expansion is under way in Singapore, Malaysia, Indonesia, Thailand and the Philippines, adding at least 100 million TEUs (20-foot equivalent units) of new container-handling capacity over the next 20 years, with most of this planned along the Straits of Malacca.

“Although the new capacity will provide opportunities in terms of scale, there is a possibility of running into a supply glut and an ultra-competitive situation if trade growth does not keep pace,” she said.

She added that  the prominence of the Straits of Malacca vis-à-vis global trade must be closely monitored, especially with China pursuing its ambitions through the One Belt, One Road initiative.

From a funding perspective, Davinder sees the financing needs of the Malaysian and regional port sectors as massive if all the announced expansion plans come to fruition in the near future.

“However, we expect a gradual roll-out. On this note, domestic funding needs through the next five years are projected to hover around RM5 billion, factoring in the expansion of Kuantan Port, Sapangar Bay Container Port [in Sabah] and Port of Tanjung Pelepas [in Johor], which are deemed more definite than those of the others.

“This estimate may swell to over RM250 billion if large-scale projects such as the third Port Klang at Carey Island and the Melaka Gateway projects take off,” she said.

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