According to data provided by Northport and Westports, the two operators at the country’s main shipping hub, an increase in loads over the past four years has seen a reverse since April this year.
“Cargo throughput was down a sharp 8.4% in the second quarter of this year to 3 million twenty-foot equivalent units (TEU). This followed a flat first quarter of 0.9 per cent growth,” The Straits Times reported.
The outlook is bleak too, according to an analyst with UOB-Kay Hian, a Singapore-based global investment bank.
“Westports is now conservatively guiding 2017 volume may decline 7-12% and next year’s prospects remain murky,” UOB-Kay Hian analyst Kong Ho Meng said of the operator which controls three-quarters of the total capacity.
According to the Singapore daily, industry officials said that the business downturn in Port Klang is due to major shipping companies moving their operations to the island republic under new alliance agreements.
“Ocean Alliance, which includes state-owned China Cosco Shipping, the world’s fourth-largest player, made a huge shift from Port Klang to PSA Singapore’s terminal in April,” Straits Times reported.
France’s CMA CGM, the biggest company in the rival Ocean Alliance, and United Arab Shipping Company (UASC), a member of rival THE Alliance, have both moved their transshipment volumes, that is goods stored before being shipped to their final destination, from Port Klang to Singapore.
The result is that Port Klang is potentially losing out on up to 2 million TEU annually.
“Both shipping groups, which handle nearly half the world’s shipping capacity, started realigning in April, resulting in more than half of Klang’s Asia-Europe calls being shifted to Singapore, industry officials told Straits Times.
The daily added that among the world’s top 20 ports, Port Klang was one of only two, the other being Tanjung Pelepas on the south coast of Johor, to see a drop in volume in the first half of this year.
All this has added to concerns in the industry over China’s commitment to support Malaysia in its infrastructure and logistic projects.
Last month, the the RM55 billion ECRL was launched in Kuantan, with Prime Minister Najib Razak calling it a game changer for the country lauding it as an “alternative trade route to Singapore”, as the line will link Port Klang in the west coast of peninsula to Kuantan Port in the east coast.
The ECRL project will be built by the China Communications Construction Company Ltd, with 85% of the project financing, including a soft loan of 3.25% from China Exim Bank.
But the lack of Chinese equity as opposed to just being development partners is a cause for concern as a former top port executive admitted.
“Only Kuantan Port has Chinese equity so far because it also aids Beijing’s South China Sea claims. Other infrastructure plans have either not taken off or are only loans, or worse, just Chinese companies winning construction deals,” former Port Klang Authority chairman Lee Hwa Beng told The Straits Times.
Among the projects that are in the pipeline along the west coast of Malaysia are the China-backed Melaka Gateway, estimated to cost RM43 billion, and on Carey Island, which sits just off Port Klang.
According to ST, both government and industry sources say that Chinese companies earmarked to take a stake in these two projects have had reservations over their viability. The planned port for Carey Island now has an Indian partner, with its mooted valued halved to RM100 billion.
Meanwhile, an analyst from Hong Leong Investment Bank questioned the Malaysian government’s approval for Westports to double its capacity to 30 million TEU last month, especially with the reduced volume so far this year.
“We are still unsure of the need for the group to expand its capacity to the level mentioned as the talk of a third port in Klang is gaining traction,” Hong Leong Investment Bank’s analyst Lim Sin Kiat was quoted as saying by ST.
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