Shippers search for alternative freight modes

NST Mon, Oct 18, 2021 09:47am - 2 years View Original


KUALA LUMPUR: Shippers (importers and exporters) are searching for alternative freight modes via air, land or rail modes to secure incoming and outgoing materials, according to Malaysian National Shippers Council (MNSC).

Exorbitant sea freight rates have prompted shippers to opt for alternatives due to reduced available capacity on shipping lines and container shortage, causing the world's supply chain problems.

MNSC chairman Datuk Dr Ir Andy Seo said the level of pressure on shippers had forced sea freight rates to surge at an all-time high between 100 per cent and 700 per cent higher than the pre-pandemic levels.

"This has led to high transportation costs, causing companies to make transport-driven shifts in their supply chain strategies," he told the New Straits Times (NST) recently.

Seo said MNSC had initiated engagement sessions with key industry players such as AirAsia Group Bhd, Teleport and Freight Chain, allowing shippers to learn other viable alternatives to sea freight for faster, cheaper and reliable freight services.

"Shippers are also forced to bear other logistics costs such as the warehousing, forwarding, haulage and landside charges, which have increased in parallel to the freight rates."

Seo added that the rising logistics cost had adversely impacted the entire supply chain weighing on consumers while affecting export competitiveness.

"There is no certainty when this situation to normalise. Therefore, shippers try to cope with the situation by engaging with multiple forwarding agents and shipping carriers for quota utilisation and rationalising the limited container, vessel space and cargo with their customers.

"Shippers also work with agents to reschedule to the earliest possible delivery date to suit the demand," he said.

Seo said shippers - the main contributor to international trade - must continue to be supported as the catalyst of growth.

"MNSC has been working closely with the Transport Ministry (MoT) and other relevant stakeholders from the logistics industry to ensure that efficient shipping, air and rail services are provided at a fair rate."

MNSC urged the intervention by MoT and port authorities to request shipping lines to increase capacity and allocate equipment to more critical trade lanes.

"We also recommend the authority to provide more grants to cover logistics costs. Currently, the temporary relief granted through Market Development Fund (MDG) under Malaysia External Trade Development Corp (Matrade) only covers export shipment with a cap of 30 per cent of total logistics costs for export subject to a maximum amount of RM40,000 per shipment," he said.

Since the relief would only be available until the end of 2021, Seo said respondents had requested an extension of time to claim under MDG and expand the grant to include import shipments.

"Request for tax incentives such as tax rebate and double deduction from corporate tax should also be permitted to assist companies to cope during the challenging period.

"Digitalisation of the processes and synchronise the standard operating procedures (SOP) of the Customs Department and the other government agencies for a resilient supply chain," he said.

Seo said the industry should also reduce dependence on foreign shipping lines by developing Malaysian owned containerised shipping lines.

"Develop the Malaysian shipping container industry, which is highly reliant on imported containers to meet the growing demand," he added.

Moody's Analytics said border controls and mobility restrictions, unavailability of a global vaccine pass, and pent-up demand would cause global production disruption.

The firm said deliveries were not made in time, causing higher costs and prices.

Although demand has recovered strongly, supply has yet to catch up as there are bottlenecks in every supply chain link due to shortages of containers, shipping, ports, trucks, railroads, air and warehouses. 

Juwai IQI chief economist Shan Saeed said supply chain structural problems and hiccups would likely persist in 2023.

"The pandemic has driven a long-lasting surge in transportation cost, in particular, elevated freight costs to stretch into 2023. The cost of transporting goods is a component in every step in a company's supply chain," he told the NST.

Shan said many economies were still closed and no business was happening, which might cause supply chain hiccups between 40 per cent and 50 per cent of global growth in advanced economies.

"However, the demand is still very much intact as consumers need food, household items and other items to survive."

He said many Asean countries were still supplying globally to meet the demands of first-world economies.

Nonetheless, he said the cost of shipping containers across the ocean was higher, truck drivers were in short supply, and gas was more expensive than many expected earlier this year.

"The government should work closely with the private sector shipping industry to provide them forward guidance to mitigate the risk of supply chain woes in the global economy," he said.

Despite pandemic, supply chain hiccups and global economies slowing down, Malaysia's trade and commerce surpassed more than RM 1.12 trillion in the first eight months.

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