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Home Carriers

Re-routing of Vessels To Benefit Ports, Logistics Companies

by Dafizeck Daud
April 7, 2022
in Carriers, Courier and express, Maritime transport, Opinion, Ports, Press Release
Malaysia and US Explore Supply Chain Alliance
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The ports and logistics sector will see a gradual recovery on the back of Covid-19 booster vaccination rollouts, the normalisation of domestic and global economic activities, and the pent-up demand effect despite the setback from the Russia-Ukraine war.

According to Kenanga Research, port operators like Westports Holdings Bhd are already seeing recovery in their throughput volumes while enduring new variant outbreaks.

“The majority of ships that call at Westports facilities are from the intra-Asia routes that saw easing lockdowns and recovery in trade activities despite having to endure another outbreak of the new Omicron variant, especially among the European countries,” it said in a report.

While the Russia-Ukraine war has somewhat delayed the supply chain recovery, some of the supply was re-routed to safer intra-Asia routes. Going by these, the research firm is cautiously optimistic about 2022.

On Westports’ RM10 bilionl expansion plan, Kenanga Research said the plans were on track to cater for future trade volume growth, with full completion only by 2040.

The expansion is expected to double Westports’ capacity to 27 million twenty-foot equivalent units (TEUs) from 14 million TEUs.

“We view this investment as a very long-term play for the group, thus ruling out any earnings accretive development over the next few years. The global supply chain is adjusting to a combination of factors, such as higher consumer demand for containerised goods in Western economies, easing in lockdowns and a global supply chain adjustment adhering to Covid-19 measures,” it added.

However, the approved new container terminal expansion project is currently pending approvals from various bodies. On the one-off prosperity tax or “Cukai Makmur” at an effective tax rate of 33 percent, the research firm expects the port operator to take the full brunt in the financial year 2022.

As for logistics players like Pos Malaysia Bhd, Kenanga Research said the company’s transformation strategy was expected to bear fruit by the second half of the year.

“Pos Malaysia is facing capped profitability in its postal and courier businesses from tight prices amid high operational costs.

“This is offset by stringent cost-cutting measures and turnaround improvement from both its logistics and aviation divisions capitalising on the freight management business, automotive-related business and aviation division’s rising contribution from e-commerce warehousing, higher cargo tonnage handled (increasing number of flights), and ground-handling businesses,” it said.

Kenanga Research noted that the company’s logistics and aviation divisions saw a turnaround in their latest financial results. The Pos Malaysia group is continuing its efforts to manage costs with a targetted yearly RM24mil cost savings, it added.

Tags: ContainersLogisticsShippingSupply Chain

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