Sky-high freight rates putting further stress on shipbuilding industry in Sarawak

Dr Renco Yong

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SIBU, Jan 26: Sarawak Association of Marine Industries (Samin) expresses concern over the high freight rates imposed by shipping companies which is now adversely impacting shipyards in Sarawak and by extension, Malaysia’s marine industries.  

The sky-high rates of liner shipping companies servicing the trade lanes between China and Malaysia have increased the prices of raw materials, components and equipment imported by local shipyards.

“Up to 75 per cent of a ship is made of steel and many local shipyards buy from China due to its competitive price and relatively good quality.  

“Following transportation cost reaching heady levels as Chinese exporters try to cover their costs, the cost of imported raw materials and items have also gone up dramatically,” said Samin president Dr Renco Yong in a press statement today.

He said the sudden spike in container rates has been witnessed since the opening up of economies following the attainment of herd immunity in many countries worldwide.  

Supply chains and container shipping operators were ill-prepared for the surge in goods flowing through as demand for commodities and manufactured goods spiked.  Bottlenecks along supply chains, which were already forming during the times of movement control order and lockdowns, became worse as more cargos tried to find their way from suppliers to end-users.

“The closure of some ports in China as a measure to curb the new surge of the pandemic, the shortage of containers to be repositioned, the shortage of trucks, drivers, warehouse space and workers in the logistics chains which caused massive port congestion especially in the United States, and the re-routing of ships by shipowners to serve more profitable trade routes, all combine to contribute to the sharp increase in freight rates in the container trade,” said Yong.

He said presently, the transportation of a 40-feet container (FEU) costs a whooping US$17,500 (around RM73,000) in the Asia-Europe trade at the beginning of the year, compared to a mere US$4,000 in December 2020.  

The busy Trans-Pacific and Intra-Asia routes have also seen similar spectacular increase in freight rates.  

Yong said many shipyard operators in Sarawak who are already struggling in these lean times would suffer further blows if the crunch in container transportation and supply chains do not ease up soon.

“Local shipyards would stand to lose orders for new building projects as the higher costs of imported materials and items to build and repair ships would undermine their competitiveness”, Renco pointed out.    

“As it stands, their businesses have already been severely impacted by the economic fallout from the pandemic and the slump in the marine industry as a result of.  Another hit like what they are suffering now with the high freight rates would cause further pain to them,” he added. — DayakDaily