International Business & Economy Malaysian ports losing to where rivals shift businesses

Malaysian ports losing to Singapore where rivals shift businesses

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A report in the Straits Times indicates that ’s bid to become the main shipping hub in the region is taking a hit with major shipping companies shifting their services to .

Port Klang saw two shipping companies – The Alliance and Ocean Alliance – that have started realigning in April, resulting in more than half of Port Klang’s Asia-Europe calls being shifted to Singapore.

The report indicated that industry officials said the two rival groups which handle nearly half the world’s shipping capacity has shifted their operations to Singapore under new alliance agreements.

The new alliance agreements’ biggest impact on Klang was the loss of transshipment volumes – goods stored before being shipped to their final destination – from giants United Arab Shipping Company (UASC) and France’s CMA CGM.

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This could total up to 2 million TEU annually. UASC has now merged with Germany’s Hapag-Lloyd, making it part of THE Alliance, while CMA CGM is the biggest company in the rival Ocean Alliance.

This has raised questions over the aggressive plans by Kuala Lumpur to build new harbours and rail links along the Strait of Malacca, one of the world’s busiest maritime trade routes.

Many of these are in partnerships with Beijing, yet the Ocean Alliance – which includes state-owned China Cosco Shipping, the world’s fourth-largest player – made a huge shift from Klang to PSA Singapore’s terminal in April.

The Straits Times understands that this has added to concerns in the industry over China’s commitment to supporting the logistics industry in .

Beijing and Kuala Lumpur had been talking up joint transport infrastructure in Malaysia, such as last month’s launch of the RM55 billion (S$17.6 billion) East Coast Rail Link to be built and financed by China.

The project will link Port Klang to Kuantan Port which faces the South China Sea, in what Prime Minister Najib Razak called an “alternative trade route” to Singapore.

CMA CGM and Cosco have naturally gravitated to Singapore as both have major investments there. PSA saw a 9.6 per cent jump in the second quarter to 8.5 million TEU.

Among the world’s top 20 ports, 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.

The slowdown added to concerns of oversupply due to plans for new China-backed megaports like the RM43 billion Melaka Gateway and on Carey Island, which sits just off Klang.

Still, the Malaysian government is insisting that cargo volumes are set to rise as the country strengthens connectivity with southern Thailand and Sumatra across the Strait of Malacca.

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