An aerial view of Bintulu Port.
PETALING JAYA: Amid the economic uncertainty, global trade is expected to remain sluggish, which would not augur well for port operators.
According to Kenanga Research, global merchandise trade volume is projected to inch up by only 1% in 2023, down sharply from a 3.5% expansion in 2022 based on the World Trade Organisation data.
Furthermore, stricter regulations on carbon emissions may also pose new challenges to global trade, particularly from the United Nations’ International Maritime Organisation (IMO) and the European Union (EU).
The research firm said while the exact implications of the regulation of IMO and EU’s Carbon Border Adjustment Mechanism (CBAM) on the seaport and logistics sector remain unclear as CBAM is still pending finalisation), the volume of containers heading to the EU will certainly be affected with about 18% of container throughput under Asia-Europe trade.
This is especially so on goods originating from China, which is a major exporter of iron and steel and aluminium to the EU.
It said under the new IMO rules, effective Jan 2023, all ships must report their carbon intensity and will be rated accordingly.
The ships must record a 2% annual improvement in their carbon intensity from 2023 through 2030 or face being removed from service. Meanwhile, the EU’s CBAM policy could disrupt the exports of certain commodities, such as iron and steel, cement, aluminium, fertiliser, electricity, plus hydrogen, to the EU.
However, Kenanga Research believes that Bintulu Port Holdings Bhd
will be able to weather these macro challenges due to its stable operation in the handling of liquefied natural gas cargoes, and from a potential tariff hike.
Bintulu Port is also poised to benefit from the long-term growth potential of Samalaju Industrial Port’s hinterland in Samalaju, Sarawak driven by the growing investment in heavy industries, it added. On the other hand, Kenanga Research said the local logistics sector is expected to remain the bright spot being less directly exposed to external headwinds. Local players will also continue to ride on the booming eCommerce.
“Industry experts project the local eCommerce gross merchandise volume to grow at a compound annual growth rate of 11% from 2022 to 2027, while its size could reach RM1.65 trillion by 2025 from RM1 trillion currently,” it said.
This, according to the research firm, will spur demand for distribution hubs and warehouses to enable just-in-time delivery and the reshoring and nearshoring to bring manufacturers closer to end-customers.
Kenanga Research also sees warehouse decentralisation to reduce transportation costs and de-risk the supply chain.
“There is also strong demand for cold-storage warehouses on the back of the proliferation of online grocery start-ups,” it added.
Its stock pick in this space is Swift Haulage Bhd because of the company’s leading position, commanding close to 10% market share in the haulage segment.
Apart from this, Swift’s pre-tax profit margin of 10% is higher than the industry average of 4%.
