Shipping costs have soared by 40%, can Malaysian companies benefit from this?

The Red Sea crisis began to affect the Asian shipping market. Not only did it cause port terminals to be congested, but shipping rates also increased by nearly 30-40% last month; it is reported that following the “explosion” of the Singapore port, Klang Port in Xuzhou, Malaysia, and Tanjung Pelabas Port in Johor have also recently faced congestion!

According to information, the tense situation in the Red Sea continues to this day, and it has seriously disrupted trade to and from the Suez Canal waterway. In addition to causing shipping premiums in the Middle East region to rise, it has also caused shipping costs to Europe, the US, and the Atlantic Ocean to be drastically raised by nearly 40 to 50%.

On the Malaysian side, it is reported that local customs brokers have successively issued notices to increase shipping charges starting on the 1st of this month.

According to a source in the shipping industry revealed to “Nanyang Commercial Daily”, the Red Sea crisis has also led to an increase in ship rents, and now shipping costs in China, South Korea, Japan and other regions have increased by nearly 30% to 40%.

“As more and more shipping companies choose to bypass Cape of Good Hope at the southernmost tip of Africa, shipping times were delayed by about 14 days, which ultimately disrupted shipping schedules to Asian ports. The detour lengthens the operating time of ships at sea, and invisibly affects container turnover, causing the market to face insufficient supply of empty containers.”

Furthermore, it is reported that Chinese shipping companies are fearing a shortage of empty containers, causing a rush to buy, and the market expects the “free charge” era of containers for 6 to 7 months to come to an end.

According to the news, due to concerns that the supply of empty containers will be greatly affected in the future, and in anticipation of an improvement in the Chinese market, some Chinese shipping companies have begun to buy containers to stock up for future demand. This will further increase market supply, and may eventually cause container charges to gradually rise.

“After the 2020 (COVID-19) pandemic, the shipping industry experienced a period of spectacular development in 2021, but declined in 2023 due to economic effects, which in turn dropped the charge for empty containers from thousands of dollars to the level of zero charges in the past. However, we believe the era is coming to an end, including low shipping costs and the supply of free empty containers.”

However, according to the news, the relevant fee adjustments will not be as high as during the epidemic. After all, port closures in various countries were involved at the time, and the situation was quite serious. On the other hand, it is expected to rise moderately this time, and adjustments will be made depending on the evolution of the crisis.

The Red Sea crisis first affected African ports. Due to increased shipping, local infrastructure was unable to meet demand, and congestion occurred in some ports. Now the related congestion situation has spread to the Asian region. Among them, the port of Singapore, the port of Klang, and the port of Johor Tanjung Bellevus are all unloading destinations.

Sources pointed out that after the route time was extended due to the detour, shipping companies chose to reduce docking locations in order to reduce docking time and avoid being “blocked” by port congestion in order to avoid a longer period of stay.

“Of the three major ports in the Malacca Strait, large ships will only choose one of them as their docking site, then unload all containers in this area at the same port and wait for the small boat to deliver the cargo to the desired destination.”

As an example, he said that a ship that was originally scheduled to dock at Port Klang and Port of Singapore, if it finally decided to dock at the port of Singapore after measuring the congestion situation at the two ports, it would also unload the container sent to Port Klang at the same time to wait for the boat to carry the container to Port Klang.

However, under these circumstances, the amount of cargo unloaded by ships will increase dramatically. For example, it was originally scheduled to unload 500 containers, but now it has suddenly increased to 1,000 to 2,000 containers. As a result, the warehouse facilities in the relevant ports will be overwhelmed. Ultimately, not only will the warehouse be congested, but the customs clearance process will also be greatly affected.

When asked by this newspaper, Xu Zhuying, chairman of the Malaysian Container Transport Association (AMH), confessed that the port of Klang did begin to face congestion during May, and customs clearance procedures were slow, so they faced customer urges.

“The Port Klang Authority and port operators have always been watching the progress of this issue and are communicating with our operators from time to time, hoping to improve congestion and customs clearance issues. We also understand that the congestion is caused by external factors; we can only wait patiently.”

As Asian shipping rates face increased charges by shipping companies, Malaysian customs brokers have also begun issuing a notice that charges will be adjusted starting on the 1st of this month.

An anonymous customs broker pointed out to “Nanyang Commercial Daily” that shipping rates in Europe, America, the Atlantic and other countries first faced increases, but now they are beginning to affect the Asian shipping rate market.

“Our company was notified of an increase in shipping charges during May, but at that time, it did not immediately raise customer charges; it only issued a notice to them, that is, to increase charges starting this month.”

However, the other party did not want to disclose the extent of the adjustments; they only said that the practices of each company were different, and the fees were set according to their own standards.

He added that shipping companies also require advance reservations for container use, and indicated that fees will be updated at any time. In other words, if you book a container this week to use next week, the shipping company will provide a certain fee rate, and if you use it again later, you will have to ask for pricing again.

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