PETALING JAYA: The seaports and logistics sector is in for a challenging period, although there is a bright spot which can uplift the sector’s earnings growth.
Kenanga Research said the logistics sector is domestically driven and less exposed to external headwinds.
Furthermore, the sector will ride on the booming eCommerce industry.
Industry experts expect the local eCommerce gross merchandise volume to grow at a compounded annual growth rate of 11% from 2022 to 2027.
In addition, eCommerce will spur the demand for distribution hubs and warehouses to enable just-in-time delivery, reshoring/nearshoring to bring manufacturers closer to end-customers, according to the research house.
The efficient automation system including interconnectivity with the customer and warehouse decentralisation will 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 startups,” it said.
At the global level, the slower merchandise trade volumes, stricter regulations on carbon emissions, lower consumer confidence and spending may pose new challenges to trade.
According to the World Trade Organisation, global merchandise trade volume will only inch up by 1.7% this year, down from a 2.7% expansion last year amid the global economic uncertainty.
At the same time, consumer confidence and spending globally are likely to take a beating on sustained elevated inflation, rising interest rates and the slowing global economy, it added.
Kenanga Research said the headwinds would not augur well for seaport operators such as Westports Holdings Bhd
.
However, it said Bintulu Port Holdings Bhd would be able to weather the macro challenges better, thanks to its stable operation in the handling of liquified natural gas (LNG) cargoes.
Another factor is the potential tariff hike at Bintulu Port as well as the long-term growth potential of Samalaju Industrial Port’s hinterland in Samalaju, Sarawak driven by growing investment in heavy industries.
“Additionally, stricter regulations on carbon emissions may pose new challenges to global trade, particularly, one from the United Nations’ International Maritime Organisation (IMO) and another from the European Union (EU).
“The exact implications of the regulation of IMO and EU’s Carbon Border Adjustment Mechanism (CBAM) on the seaport and logistics sectors remain unclear.
“This is especially for CBAM, which is still pending finalisation.
“The volume of containers heading to the EU will be affected about 18% of container throughput especially those originating from China, which is a major exporter of iron, steel and aluminium to the EU,” the research house said.
Under the new IMO rules, effective January 2023, all ships must report their carbon intensity and 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 (iron and steel, cement, aluminium, fertiliser, electricity, hydrogen) to the EU.
During the transition period between October 2023 and December 2025, EU importers must report embedded emissions in goods imported, on a quarterly basis as well as any carbon price paid in a third country.
When the CBAM takes full effect starting 2026, importers would need to buy carbon credits reflecting the emissions generated in producing them.
